A period of recession can have a number of different impacts on investment markets in general.
Whether you are a collector or an investor Fine Wine has a strong track record of being recession resilient and it has a number of unique characteristics which make it such a useful asset class.
Tangible Asset
Physical assets, like fine wine (and other commodities such as watches, gold, fine art, sneakers), can perform well in economically turbulent times as investors look to ‘real’ assets they can hold and see.
Fine Wine however is only made in limited quantities and as it is consumed this only helps to push the price up overtime.
Consumer Asset
As mentioned above the consumer side of fine wine against other luxury asset classes enhances it’s performance during financial downturns. Covid19 was a great example of this.
The global lockdown saw the demand for fine wine surge as many people looked to treat themselves and celebrate special occasions at home. A report by the Drinks business said that more money was spent on fine wine during the lockdown then before.
Rarity
The very best wines are made in supremely low numbers. A great example is the wonderful Domaine Meo-Camuzet (Burgundy) who produce around 600 bottles per wine per year.
Meo-Camuzet has all the requirements a collector looks for when building a fine wine portfolio. A highly reputable producer with wines from the most legendary vineyards, where quality is consistently high and production is limited. We have a number of wines from this superb Domaine available En Primeur 2021 – click here to register your interest.
The rarity side assists in sustaining the value of wines as demand far outstrips the supply overtime and owning something rare has always been appealing to collectors and investors alike.
Independent Market
Fine wine sits in its own self-contained global market. To have an asset with it’s own independent market is quite rare for investors and offers diversification within a more traditional investment portfolio.
This can help to explain fine wine’s resilience. In the past when global financial markets have dropped the top wines of the world haven’t seen a decrease in their value which shows the advantages of the assets independent market.
The chart below highlights the fine wine markets performance over the Covid19 pandemic against the financial markets.
Advantageous Tax
Fine Wine has always offered favourable tax benefits. In the UK for example as the asset is deemed as a ‘wasted chattel’ that make it’s exempt from capital gains tax. For investors, being able to keep more of their returns is more appealing than using other routes.
Other costs of course should be noted such as storage and please note that this document is for insight purposes and is not advice. Please speak to a tax advisor.
Looking to Start your Fine Wine Portfolio
The above is a brief understanding of the benefits of fine wine as an asset class. If you want to learn more or create a fine wine portfolio please register with us below and a member of the team will be in touch.
