The Q4 report by WineFi, the fine wine investment company backed and part-owned by Coterie Holdings, has shown a more positive picture for fine wine, arguing that the markets have finally bottomed out, with Champagne and Tuscany in particular seeing signs of “a sustained recovery”. However, WineFi’s CEO Callum Woodcock argued that the most intriguing aspect unveiled in the report is how fine wine as an asset has changed in the last 15 years, particularly as the macroeconomic drivers of fine wine prices have shifted over time.
The report noted that prior to 2011, fine wine – as represented by the Liv ex 1000 index – showed strong correlations with global equities, emerging-market growth, and credit conditions, behaving largely as a risk-on luxury consumption asset. however, this picture changed after 2011.
Woodcock argued that while collectibles are more tied to wealth – “as the world gets richer, they go up in popularity, and if there are economic shocks and economic uncertainty, they fall again”, by contrast, wine “appears to now look a lot more like residential property, so people do treat it like a risk asset, and it behaves in exactly that way.”
As the secondary market has matured, the price dynamics have become increasingly influenced by liquidity, interest rates and sterling exchange-rate movements, he said – much more linked to market forces, and the the supply of money and interest rates that influence it.
“The odd thing is that this isn’t new,” he told db. “The data that proves it goes back to 2011, which is 15 years of data. That’s not a short time horizon.”
He warned however that the revelation was likely “to irritate a lot of people within the wine trade… because it really flies in the face of the whole ‘wine isn’t an investment’ crowd.”
“It shows that wine can play a part of an investment portfolio beyond the way it is currently treated by the majority of market participants, which is that it’s the ‘fun part’ of your portfolio,” he said.
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