Wine Investment Fund bucks the markets with 10.3% return

Investors in The Wine Investment Fund (“TWIF”), a London-based wine fund, have received an annualised return of 10.3%, according to a statement by Andrew della Casa, director of the fund.

The pay-out, net of all fees except subscription fees, is on its most recently matured tranche, launched in November 2006. By comparison an investor in the FTSE 100 over the same period would have seen a negative return of 1.2% per year.

These returns come despite a correction in fine wine prices in late 2011. Since then, the market has stabilised, with the Liv-ex 100 (the leading wine index) rising by just over 1% in 2012 to date. TWIF’s return has been +0.7%, in line with the index even though the Liv-ex 100 makes no allowance for the costs of trading and storing wine.

This year has seen falls in the prices of the biggest names in the wine market, the so-called ‘first growths’ of Bordeaux. Château Lafite has been the weakest of these, confirming TWIF’s view, expressed in January, that Lafite was overpriced relative to the market.

Auction results in April reflected the more hesitant market with generally weak prices at sales in Hong Kong and London. Many (particularly younger) vintages of Lafite went unsold in Hong Kong, confirming the market’s re-evaluation of the Château. However an ex-Château Cheval Blanc/Yquem sale in New York generated some very impressive results.

Della Casa said: “Anyone expecting the market to be boosted by the 2011 en primeurs looks likely to be disappointed. Early prices have been over-ambitious for what is an average vintage at best. Château Latour’s announcement that it will not offer en primeur from 2013 has interesting longer term implications: it might drift out of the spotlight, although, on the other hand, the brand might gain greater cachet from being less accessible. On balance, we believe the move is probably positive for prices of back vintages of Latour.”

“There were some adverse economic developments as the UK returned to recession, and growth in both South Korea and China slowing – albeit that China’s growth is still strong at 8.1%.” Despite this, TWIF considers longer term inflation fears are likely to rise following India’s cut in interest rates, while inflation data from China tend to boost demand for physical assets such as wine.

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