Why Invest in wine?

At Krunch's Wine Group, our approach is that wine investment should be viewed on this traditional basis, with the priority being to purchase wines that essentially suit the taste of the purchaser, but that are also of premium quality such that their value will increase as they approach the stage of their life at which they will provide maximum enjoyment and therefore be in greatest demand.

Our recommendation is to quite simply follow these golden rules:

	Decide the wine you like
	Purchase the very best vintages of it; early in its life
	Purchase more than you think you will need for your own consumption
	Keep it for 8-15 years
	Sell the surplus as the wine approaches maturity

In most cases, the sale will replenish the cost of the original purchase enabling you to enjoy the greatest vintages of the greatest chateaux for free. There is no revelation in this process, and wines like Lafite, Latour, Margaux and Haut Brion have never been considered inexpensive even centuries ago. By following these guidelines, preceding generations of wine enthusiasts were able to enjoy the greatest vintages without excessive concern as to their cost, and the same applies today.
Speculation and current trends
It is true that fine wine has also attracted the attention of sophisticated international investors who have come to appreciate that this market of sustained growth, coupled with the limited and decreasing nature of the commodity, provides opportunities for the realisation of above average financial returns. But there are several obstacles that have prevented fine wine from becoming closely correlated to traditional investment markets. These are:

	The policy of the chateaux and distributors to segregate allocations amongst loyal consumers in their various markets around the globe, which makes it difficult for speculative investors to make sizable investments.
	Fine wine is rarely leveraged or funded by debt, and therefore forced sale disposals rarely arise.
	Widespread growth in the appreciation of fine wine and increasing consumption in emerging and new markets has been generally sustained through economic cycles. This fundamental consumption trend is expected to continue, especially with the likelihood of the further abolishing of duty in emerging markets.
	During times of economic adversity, there is an element of speculative capital that migrates from financial investment markets into tangible commodities including fine wine. This usually compensates for the inevitable diminished demand from consumption that normally rises during economic prosperity, the result being a levelling of prices rather than a crash. This occurred during 1991-92, 1997-98 and 2001-02.

Since 2004 the London based Livex 100 Index has tracked the trading pattern of many of the most sought after wines in their recent vintages. From the beginning of 2006, The Liv-ex 100 index rose 43.2% to November 07 outperforming Gold, the FTSE and Dow Jones.

Viewed as a speculative investment, in the last 20 years fine wine has also outperformed a number of equity and fixed income indices including the FTSE 100.

Conclusion
For long term (10 years plus) investors a wine portfolio is likely to provide growth in value of 10-12% per annum.

With the greatest vintages producing wines that reach ideal enjoyment at between 10 and 20 years of age, this brings us back to our original recommendation: that given careful and selected purchasing, wine investment is an ideal vehicle to create and fund perpetual consumption of a family wine cellar through multiple generations, a way to enjoy the finest wines, without concern as to their cost.

The Krunch's Wine Group provides guidance and advice upon accumulating fine and valuable wine collections for clients with contrasting tastes, budgets and timescales. We also have unrivalled access to the world’s finest wine to help clients assemble a portfolio that should increase in both quality and value.

For most of our clients the primary motive for purchasing wine is the pleasure that buying it, collecting it, and consuming it provides. Over time the likelihood is that it will become increasingly valuable, providing the comfort that one’s purchase is also an investment, in a haven where discretionary funds can be allocated to yield a great deal of pleasure.