Alternative investments have seen a surge of interest in the latest bout of market volatility, but while fine art remains a go-to sector for diversified portfolios, another, far more liquid, alternative asset is also paying off.
“Fine wine remained a haven amid the stormy macroeconomic environment,” according to Cult Wine Investments second-quarter overview.
The proof is in the pudding: The Liv-ex 1000 index, a members-only fine wine investment vehicle, was up 3.61% in the second quarter.
A slight easing year-on-year perhaps, but far better than FTSE 100’s 5% decline in the same period, not to mention S&P’s 16% decline.
Wine from the Rhone region in the east of France proved to be a source of stability in the fine wine market, while California varietals also performed well.
But the real winner this quarter was Burgundy, with the Burgundy 150 index returning over 8% to investors and nearly 24% year to date (YTD).
The UK is the largest market in the world for fine wine, followed by the US.
Looking over the past 12 months, the Liv-ex 1000 index has returned nearly 26%, compared to roughly 5% for the FTSE 100.
Drinks a whisky drink
Fine wine is not the only tipple on alternative investors’ fingertips.
The record £16mln sale of a barrel of rare whisky (in this case, a tasty cask of 1975 Arberg single malt) earlier this month smashed the previous £1mln record only three months prior.
These mouth-watering sums are indicative of an asset class that has added 478% in portfolio value over the last decade.
Who’s buying the next round?
While fine wine investments have been something to toast to recently, future guidance is a glass half full situation.
“On one hand, we recognise that if economic outlook deteriorates further and major economies tip into recession, demand for fine wine would likely moderate temporarily,” Cult Wine Investment said in its second-quarter overview.
“Growth could ease in this scenario, especially at the top of the market, namely iconic Burgundy, where recent gains have been highest.”