Fine wine investment: Lower the boats?
We have had a number of enquiries over the last couple of weeks whose question is essentially this: if Piedmont is indeed so exclusive then why bother with regional vintage and individual wine ratings? Surely the best thing to do is get your hands on whatever you can, and sit tight? If the tide of a valid secondary market ever does come in, won’t it raise all boats? And this is actually a very incisive question.
The answer really depends on how much interest you choose to take in your investment in fine wine. Amphora is happily on record as stating that fine wine is a long term activity, and one which you need to monitor only irregularly, both because the ebbs and flows in the market tend to be quite gentle and because if anything deep and meaningful happens we will notify you accordingly. (Clearly we can more easily do this if you are a client)
That said, some investors like to know the full justification for a wine being recommended for inclusion in a portfolio, while others are comfortable with a more laissez-faire approach. One is not right and the other wrong; it doesn’t behove Amphora to tell anyone how exactly to behave in respect of their finances, which is why we like to have a conversation at the start of any new client relationship to clarify the terms of engagement from a wealth management perspective.
We do believe however that as investment advisers there are certain disciplines which we must observe across every aspect of our activity, otherwise there is a danger of applying more lax rules than are appropriate, across the board. We don’t think many of our esteemed clients would value being told just to pile in regardless, so our conclusion to the above question is that while such a strategy might well work for certain investors in Piedmont at this moment in time, at Amphora we must still submit the region to the same rigorous analysis as elsewhere.
Back, then, to Gaja for the moment. The evidence is that Liv-ex ‘ain’t where it’s at’ for these wines right now, and there is a perfect logic to this. While it is normal to test out secondary market validity on its platform, where there is no secondary market you will find no activity. We found this when Burgundy emerged as the market favourite in early 2017, and there are several old notes to the effect that the last trade for such and such a Burgundy wine was back in prehistory.
Under such circumstances as these you (or more accurately, ‘we’) have to find different avenues of distribution, and the market place effectively becomes ‘off market’, or ‘over the counter’, as opposed to via the regular platform. There is no inherent problem with this, but you have to treat it as a reflection of the crucial risk element of illiquidity, and adjust accordingly. In practice you can still find offers of most of the Gaja vintages, but when it comes to selling you have to be prepared for a less immediate resolution, and it is simply this that elevates the risk profile.
Given this amplified risk scenario we actually think that the acknowledgement of higher quality regional vintage and individual wine ratings is more, not less important. Why add a further unnecessary layer of risk? Remember in addition that ‘lesser’ vintages may be cheaper, but that increases the relative cost of storage and ancillary charges. In addition at the consumption end the evidence is that people often buy by the vintage, and tailor their exact wine purchase according to budget, and this all feeds through to price movement.
As disclosed last week, the 2016 vintage for Costa Russi, Sori Tildin, and Sori San Lorenzo has just been released and is available for purchase at the identical price of £4,390, so how does this stack up? Absolutely off the scale expensive, is the answer. 2016 was an excellent year, to be sure, and the WA rating is 95, equivalent to 2010 and 2006 of recent era in Barbaresco.
The nearest in price to the 2016 is Sori San Lorenzo, where availability is admittedly scarce, but you can avail yourself of a case for just over £3,500. Against this Costa Russi and Sori Tilden are a snip at £3,250 and £3,100 respectively. So why on earth would anyone stump up £4,390 for the 2016? Well your guess is as good as ours and if money is no object and you want to particularly commemorate the year in this way then feel free, but it’s not how you engineer investment returns. The best bargain is likely the Sori Tildin 2007 where you can pick up six bottles for £1,400. This wine scores 97 and while the San Lorenzo and Costa Russi score 98 they come in at £1,700 and £1,540 respectively, quite a hike for a single point.
The Barolo rating for 2016 has not yet been disclosed, but 2010 merited 98 and 2006 a highly creditable 97, so is it likely that 2016 will exceed that, and if it scores 99 will it justify a price premium? We shall see. As promised we lifted the Sperss 2004 offer from the Liv-ex platform and frankly don’t expect anything to replace it for a while. As we say the Piedmont action is elsewhere, and it is absolutely vital to find it, particularly when it comes to selling.
This is an area we will be keeping a close eye on and if the time comes to make a buy recommendation you can be assured we will. As previously mentioned, Italian wines remain firmly in the investment spotlight due to the recent tariffs imposed by the leader of the free world. Investors might want to take advantage of the fact that consumers in the US are still buying fine wines from Europe but might be more attracted to the ones without the 25% tariff. Super Tuscans have always been a good bet but right now, Masseto 2011 at £4,800 per 12 bottles and Sassicaia 2013 at £1,480 per 12 bottles are fantastic buys.
Philip Staveley is head of research at Amphora Portfolio Management. After a career in the City running emerging markets businesses for such investment banks as Merrill Lynch and Deutsche Bank he now heads up the fine wine investment research proposition with Amphora.