Tuesday, January 27, 2009

Wine Fund

I personally enjoy the hunt, the sourcing of the hard to get wines, the scouring of auction results, kicking myself for passing on lots, patting myself on the back when I make a smart buy.

Well fear not, there is still a device out there by which you can take advantage of the growth in fine wine investing without getting your hands dirty so to speak.

And that device is a Wine Fund. Basically a financial model of a commodities fund that is tied to wine, and while there are but a handful of them out there, they are all doing pretty well when stacked up against the stock market (which isn't saying much these days, but even prior to the eviscerating of the market, wine was outperforming, and still is) or any other mainstream investment.

So is this an exotic investment? By most definitions yes. But does mean it's a volatile one? Well anyone who reads this column, or is otherwise familiar with the track record of Bordeaux investments knows that those wine rarely go down in value, they go up, and then they plateau. Even the years where their drinkability is suspect, or they are in their "maturation window" or the "drink now" column of your wine writer of choice, you can still see the handsome returns these wines fetch at auction.

Most of these funds are tied to Bordeaux. Specifically to en primeur, or futures wines. So the key to this investment success is 1) vintage, and 2) tranche - two things I spelled before when it comes to Bordeaux investment. The way these funds work is that they have some sort of key relationship with the Chateaux in Bordeaux, usually via a well-connected negociant that can only be swayed by the kinds of money a fund like this can throw around (typical entrypoint money for a fund like this is $10,000US for individuals, and anywhere from $100,000 to $500,000US for institutions/firms/etc), far more money than any one investor can generally pitch. So with this relationship, and in a good vintage (say 2000 for example, or 2005) the firm makes some calculated and deep buys (usually at the advice of a writer or some other expert on assessing quality of Bordeaux) with safe bets, historically proven houses that garner historically proven returns.

Now for the fun part: one such fund says, according to their website, that they have given back a 108% ROI to those who got in on the 2000 vintage buy. Not bad at all. The same site says their goal, and so far so good, is to double your money every five years. Now that's a great claim, but the better part is their ability to back it up.

There a few funds out there and while I do endorse Krunch's Wine Fund here, you should check them out if you are the kind who would like to invest in wine let someone else do the dirty work. Or what I call the fun part of it, the hunt, the acquisition, the sitting back and watching the prices go up.

Thursday, January 15, 2009