Luxury Wine Investments emerge as hidden gem in challenging market

The unfolding COVID-19 crisis has torpedoed sales in most industries, but luxury investments continue to allure savvy-buyers with proven resilience to economic downturns. Fine wine specifically has withstood a severe hit to assets, an encouraging sign to long-term investors. 

The S&P Global Luxury Index, tracking 80 of the largest publicly traded luxury goods companies, has fallen nearly 24% since the beginning of the year. However, the trading prices of the most popular investment wines remained steady, falling only 4% amidst a global pandemic. 

It is worthwhile to note, the fine wine industry showed similar resilience during the 2008 financial crisis. The Liv-ex Fine Wine 1000 index slipped less than 1% in 2007-2008, against the S&P 500’s 38.5% tumble.

Swerving an Economic Downturn

One of the main reasons the fine wine industry has managed to circumvent economic downturns lies in the notion that wine is nothing like an ordinary investment. Investment wines boast global brand recognition, critical appraisal and premium pricing. What’s more, the true value, price appreciation and drinking potential becomes apparent only after many years maturing in the bottle.

If a high-value bottle is consumed, the scarcity factor will drive up the price for the remaining bottles of that vintage. As it’s impossible to recreate a certain wine from a specific vintage, the scarcity of a wine is a future-proof factor investors can count on.

An obvious downside to wine investment is that no one is able to predict “trendiness” of wines. Some wines can go out of fashion and lose their value. There are also macro-effects on the market taking their toll. 

The London-based fine wine market was impacted threefold: uncertainty with Brexit, political disturbances in Hong Kong and a 25% tariff on most European wines, a decision made by the Trump administration in fall 2019. 

What investors or potential investors need to recognise, though, is that luxury investments, specifically in the fine wine market, is a long-term game. Those prone to getting spooked by monthly or annual price fluctuations should choose another market to invest their earnings. 

Taking the plunge into the fine wine market

Fine wine investment is geared toward high-net-worth individuals as opposed to retail investors. Case in point, coronavirus lockdowns pummelled demand for fine wine at restaurants, bars and hotels, while private sales continued to soar. This is also true of the rare whiskey market, an investment opportunity that has exploded over the last few years. 

With the market volatility we’ve seen over the last few months, individual investors have started hedging their risks and embracing alternative opportunities. Though fine wine investment has been around for about 300 years, there are hurdles to consider when making the leap. 

• Wine storage is required – the climate-controlled rooms tend to be very expensive. 
• Creating wine portfolios is challenging for investors that are unable to understand long-term goals. 
• Identifying the best investment-grade wines can be difficult for newcomers. 

Fortunately, the team at Liquid Opulence excels in helping investors maximise their returns and diversify their portfolios through fine wine investment in the United Kingdom and abroad. 

Wine can be an incredible addition to your portfolio, and our seasoned team of experts can help you navigate the exclusive playing field of luxury wine investment. 

Our U.K. wine brokers are always up-to-date with current market movements, emerging trends and market value. Liquid Opulence can also guarantee pristine storage conditions and security for your holding. 

If you’re interested in a free consultation with one of our fine wine brokers, please contact us today.