WIF report shows wine has outperformed gold

  • Bullish on wine: Rodney Birrell, of the Wine Investment Fund

    Bullish on wine: Rodney Birrell, of the Wine Investment Fund


While gold is seen as the traditional safe haven investment in uncertain times there is a commodity that has performed even better over the past two decades fine wine.

The Bermuda-based Wine Investment Fund (WIF) has produced a report indicating that between 1993 and the start of this year, fine wine prices rose seventeenfold producing an annual return of 16.7 percent.

In comparison, during the same period gold rose fourfold, producing an annualised return of 8.6 percent, while the FTSE 100 UK share price index doubled, returning 4.2 percent per annum.

The fine wine prices are based on data from the Liv-ex wine exchange.

WIF’s reports notes that gold and wine markets are becoming more correlated and have behaved very similarly since mid-2008, just before the collapse of investment bank Lehman Brothers sparked a global financial market meltdown and the Great Recession.

During this period and up to the start of 2011, returns from wine at least kept pace and frequently exceeded those from gold, the report stated.

“Gold’s properties as a store of value in uncertain times and a hedge against inflationary expectations are well known and have led to its rapid price increases in the last few years,” stated the WIF report, entitled “Liquid Gold”.

“These increases have prompted a search for alternative ‘safe haven’ physical assets. Fine wine has many of the advantages of gold, without some of the drawbacks of other commodities.

“It therefore seems that wine, as an asset class, is beginning to represent a plausible alternative to gold: it is, in short, acting in a more ‘gold-like’ way.”

The report also concluded that wine’s superior performance did not come at the price of greater risk, since wine had shown significantly lower volatility than gold during most of the past 18 years.

WIF was launched by Bermudian Rodney Birrell and Briton Andrew della Casa in 2003. The fund invests exclusively in fine Bordeaux wines. With money raised from investors for each tranche, it buys wine and stores it for five years. Then it sells the wine and divides the proceeds between investors. WIF aims for investors to double their money, net of fees, over the five-year period.

So far the model has proved successful. The first five tranches to pay out, over the past three years, have delivered annualised returns of between 13 percent and 17.1 percent to investors.

Useful website: www.wineinvestmentfund.com

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Published Aug 4, 2011 at 9:14 am (Updated Aug 4, 2011 at 9:12 am)

WIF report shows wine has outperformed gold

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