Investors who want to make a play in the highs and lows of valuable wines can now do so through a recently launched mutual fund.
The Oracle Paradis Wine Fund was launched in December with the goal of buying under-valued bottles of vintage wine and other valuable spirits to provide uncorrelated returns for investors.
The fund's managers say the time may be ripe for such investments. Wine price levels are below their 2008 and 2009 peaks and have generally drifted slightly down in the last year, said David Nathan-Maister, director of the fund, which was launched by the Oracle Capital Group, a London-based independent multifamily office. The fund invests in classic Bordeaux and Burgundy wines, rare cognacs aged in the 18th and 19th centuries and Scotch whiskies from before 1940.
“They have fallen as a consequence of the overall global economic downturn, but our active trading strategy gives us the potential to make profits even in a flat market,” Nathan-Maister said.
In 2012, the Liv-ex Fine Wine 100 index, which tracks the price of the best vintages, fell 9 percent, he said.
“Wine is a unique asset offering intrinsic value much like property and commodities. When you take a three- to five-year view, prices appreciate and can yield 10-percent annual returns depending on your investment,” said Martin Graham, chairman of the advisory board for the Oracle Capital Group.
The wealth boom in China and other emerging markets has had a heavy influence on the price of wine and other high-end luxury collectibles, according to experts.
“There's strong demand from China that continues to prop up the value of first-growth Bordeaux and other high-end segments around the world,” said Robin Goldstein, author of a wine guide entitled, “The Wine Trials.”
The fund has attracted about $3 million in investments since launch and currently has an inventory worth about $4 million, according to fund officials.
Weather is the main risk of investing in wine, experts note.
“Supply of high-quality wine is limited when demand is growing daily. A massive hail storm could kill a vineyard and a bad winter can affect the supply,” Graham said. “The growth of wine is rooted in the emerging middle class in Asia and Eastern Europe. They understand buying a commodity with intrinsic value and that’s what wine represents.”
Oracle’s wine fund aims for medium- to long-term capital growth by spreading risk across classic wine and vintages. The fund recently acquired bottles of Cognac Clos de Griffier 1789 from the cellars of the famous La Tour d'Argent restaurant in Paris.
“Wine is less correlated with movements in the stock and bond markets than many other investments,” said Nathan-Maister. “Our goal is to generate above-inflation returns through highly informed purchases, access to first-buyer pricing from the very top chateaux and active trading of the rare spirits portion of the fund in particular.”
What sets wine apart from investments like property is that it is a more liquid asset because it’s easier to sell and buy a case of wine than it is to buy and sell a house.
“By offering stock of exceptionally rare cognac and whisky owned by the fund for sale to collectors, we aim to generate trading profits even in an overall environment where the wine market may be flat or trending downward,” said Nathan-Maister.
The fund’s investors so far are all European, from Russia and other states of the former Soviet Union. Individual who wish to invest in the fund must be "sophisticated investors," as defined in the U.K.'s Financial Services and Markets Act 2000. The minimum required investment is $100,000 for individual investors. The fund charges a 2-percent management fee.
Its wines are stored in bonded warehouse cellars and bottles are sold through public auctions and to wealthy individuals. “London City Bond's Vinoteque is the finest and most secure facility of its type in Europe. Storage and insurance costs are nominal relative to the value of the wine,” said Nathan-Maister.
