There are two types of wine investors: those who buy wines they want to explore, and who set them aside for later when the sensory value will have increased, and those who buy, gambling that the price will rise neatly. The investors will either sell it or open the bottle when it is time to impress someone, a second business transaction.
“Wine Investment and the Financial Crisis”: plenty of money, little drinking
A research paper published in 2009 and updated in March 2010 by University of Fribourg economics professor Jean-Philippe Weisskopf and co-author Philippe Masset has been making the news around the world, but wine lovers should beware that it’s about the second group, the investors. “Raise your Glass: Wine Investment and the Financial Crisis” , reviews how wine auction prices performed from 1996-2009 in order to determine if wine was a better investment than shares during this period. They concluded that wine was indeed a good investment, confirming popular media reports: “Our findings show that the inclusion of wine in a portfolio and, especially more prestigious wines, increases the portfolio’s returns while reducing its risk, particularly during the financial crisis.”
The study covers a longer period than earlier ones and includes “two significant economic boom phases (1996-2001 and 2003-2007) as well as two major economic and financial crises (2001-2003 and 2007-2009).”
My initial reaction: this is bad news for lovers of fine wine, with investors driving prices so high that top wines are often unavailable to all but the very wealthy – who are not necessarily winelovers.
I watched at the April sales in Bordeaux in 2009 as the money men scouted and bargained. They know their business and their wine, but the joy of discovering superb wines is noticeably absent from the transactions and I went home feeling that the best of Bordeaux had been glossed over in the process of selling it. A beautiful woman must have felt much like this in the Middle Ages when her father closed the deal to marry her off and the new husband glanced at her before rubbing his hands and smiling over the land that came with her.
The secret of affordable fine wine: avoid the big names
Read more closely and you’ll work out that Weisskopf’s research is in fact good news for people who love fine wines made in small quantities, from smaller regions that attract less attention from investors. Places like Switzerland, Austria, less-famous regions in Italy and France, Spain. The prices of these wines remain far more reasonable. For those who want to “invest” in fine wines to drink them later, it’s an advantage to be interested in wines that are outside the moneyed circle’s target groups.
First, though, what is “fine wine”? It’s a widely used term, but means different things to different people. Jamie Goode, a British wine blogger, carries a guest column that is broad in its definition – what some people would label simply very good wine. The French generally consider fine wines to be a small percentage of the very top wines in the world, that are made from old vines with the ability to age well (not all wines can). Unusually for the French, where wine is concerned, they don’t have a law covering the definition. The investing world tends to consider fine wine that which is expensive and which has a market. British wine writer Jancis Robinson in March published a lovely graph showing the relationship between the index of fine wine prices and the number of billionnaires in the world (source, fine wine traders Liv-ex)
A detail from Weisskopf’s research that matters for wine lovers and that was left out of some of the news reports is that 90 percent of the wines included in the study come mainly from three major wine regions, the US, France and Italy, and only their biggest regions. Another is that these were wines traded at least once a year. And they included only wines from 1981-2005: earlier wines are considered antiques and new ones are too young, coming on the market only in 2008.
“In times of economic uncertainty investors are increasingly looking for alternatives to diversify their portfolio and often turn to less conventional assets. Fine wines, in line with other collectibles such as art works, coins or stamps, are widely promoted as being interesting choices due to their interesting risk-return profile and low correlation with other asset classes,” Weisskopf and Massey wrote. But this doesn’t mean taking serious risks, like buying the beautiful 2001 Sassi Grossi Merlot made by Gialdi Vini in Ticino that I tasted recently at the annual Memoire des vins suisses review of its members’ aging wines. A risk because there is not enough of it, happily, for investors to be interested or to know about it, so you might be forced to drink it rather than selling it for double the price.
And the paper doesn’t include the multitude of unusual fine wines for which Switzerland has developed an excellent reputation among winelovers in the know, because these postage stamp size vine parcels and mini-micro-climates result in very small productions. Two Valais brothers, Antoine and Christope Bétrisey, held an open day Saturday 3 April at their Alpine hillside cellar, built in 1717, where rare gems such as a Reze single grape wine and Conquête, a wine made from the Fumin variety in the Aosta Valley in Italy, can be sampled. The white grape Roussanne is a close kin to Marsanne and the two together make up the Valais white wine known as Ermitage, which can age very well. The famed Hermitage white wines from France’s Côtes du Rhône region are made from these grapes.
Or consider the wines from Louis Bovard in Cully, one of the best wineries in Switzerland, whose white Médinette has been a popular favourite for decades. The cellar holds several vintage bottles. This is a wine that ages well, as does the Archevesque from the cellar’s vines in nearby St Saphorin. The beautiful old vines and ancient vineyards of this Lavaux region, a Unesco World Heritage site, create many fine wines which are embellished for winelovers by the beauty of the landscape along the shores of Lake Geneva.
You don’t have to spend $5,000 to invest well in some of the world’s best fine wines. Shhhh.