(International Investment) - New research from global fine wine merchant Bordeaux Index reveals that young UK investors are turning to fine wine as a way to grow significant wealth, as part of their post-pandemic investment strategy.
Almost three in four (73%) of those under 25 who invest in the liquid asset say they spend up to £20,000 per year on fine wine. A significant minority (7%) say they spend between £50,000-£500,000, demonstrating a clear trend for a higher proportion of wealthier investors to have wine portfolios.
The poll of 2,000 UK investors revealed that almost half (46%) of those questioned have already invested in alternative investments including fine wine, whisky, art and crypto. This rises to 62% for investors under 25, dropping to under a quarter for older investors over 65 (24%).
On the back of increased interest in wine following the pandemic, sales at global fine wine and spirits trader Bordeaux Index have increased by 44% YoY. This upward trend is also present on the company's trading platform, LiveTrade, which allows customers to trade their liquid assets. It has seen an uptick of new accounts 50% YoY.
Grape Expectations
There are a number of reasons why wine has become a popular option for investors:
- Two in five (39%) say they invest in fine wine due to its accessible entry point compared to other alternative assets
- A passion for the subject matter helps; around a third (35% of younger investors, 29% of older) said their investments were linked to a personal interest in wine
- For younger investors under 25, 55 per cent say they think wine investment offers long term stability, almost a third (30 per cent) believe that fine wine is a great way to diversify their portfolio, while 29% say they chose it due to past disappointment with returns received from more traditional investments within the stock market.
- However, the older investors have their eye on enjoying the prize as well as making money; a third (32%) of over 65s say they are focusing on wine to enjoy in their retirement.
Whilst Bordeaux wines remain a favourite stable investment for the majority (48%), alongside Burgundy and Champagne (both 42%), investors have also been branching out in particular into Italian wines (41%) given their increased global prominence; indeed, they now register with almost the same popularity as the more established investment regions. English wines are also whetting an investment appetite amongst younger investors, with almost half (47%) saying they're of interest.
However, investing is not worry-free; inflation (59%), Covid variants (56%), Brexit (55%), the impact of climate change (48%) and a lack of portfolio diversification (35%) are all giving investors reason for concern over the next six months.
But despite this, Gen Z investors are positive; almost half (49%) feel confident that fine wine's resilience makes it a good investment in times of crisis. Further, more than half (53%) also believe that fine wine investments offer low volatility and healthy returns.
Matthew O'Connell, CEO of LiveTrade, Bordeaux Index's online trading platform said: "For those worried about what 2022 may bring to their investments, wine's clear capital preservation across the pandemic and its outperformance in 2021 (+19% vs. +14% for UK equities) is clearly very encouraging. Given its accessible entry point, history of alignment with inflation, and long-term track record of outperforming equities, it is unsurprising that investors, particularly those in the younger generations who have the thirst to look away from very traditional assets, are turning their focus to wine."
According to O'Connell, the best wines to back this year are:
1. Champagne - A star performer of luxury wine investments in 2021, delivering strong returns, up by more than 25%. From prestige cuvees such as Dom Pérignon to Krug, Champagne is set to continue to see outsized interest throughout 2022, especially if you can get your hands on a stellar vintage such as 2002 and 2008.
2. Bordeaux - Both old and young vintages are causing a stir currently, but a classic investment option would be blue-chip claret, which put in a strong performance on the LiveTrade fine wine platform in 2021. Its price grew by 15%, evenly split across First Growths, Second Growths, and wines from the Right Bank. Performance across Château Lafite and Château Mouton Rothschild makes them great contenders for a confident investment in 2022.
3. Burgundy - Trade volumes from the region are up by 35% and strong gains are expected to continue into 2022, as increasing demand meets dwindling supply off the back of a series of reduced harvests, not least the frost-ravaged 2021 vintage. Look out for names such as DRC's La Tâche in Vosné-Romanée and Domaine Armand Rousseau in Gevrey Chambertin.
4. Italy - While not quite hitting the dizzy heights of the Super Tuscans in 2020, Italian fine wines are still enjoying around 30% trading volume growth on LiveTrade and are an attractive investment portfolio option into 2022. Tignanello did particularly well in 2021 and could continue to outperform this year.
By Mark Battersbyclock
February 4, 2022
