Wine Owners outlines three steps to wine investing
Nick Martin founder and executive director of Wine Owners has discussed the development of a service seeking to enable investors to manage their portfolios of wine.
Wine is a real asset that many investors seek out as part of their overall
portfolio diversification. Along with other real assets such as fast cars and paintings, recent years have been good to some, but not all, vintages and chateaux.
One major hurdle is the ease with which investors can at a moment’s notice draw up an estimate of the value of a portfolio of bottles which may be stored in any number of cellars or warehouses.
Nick Martin (pictured), founder of Wine Owners, say it is precisely these sorts of practical challenges facing buyers and sellers of wine that lead to the development of the technology and service that is soon to be extended beyond its original sterling-based presence.
The service asks users to think about wine in three steps: to create a cellar; to add wine, and manage the portfolio – including use of a ‘wine passport’; and access to a storage system.
For this to work, it was necessary to develop a platform that took a neutral approach to buyer and sellers, facilitating a broking function that avoids offering particular advice, but which at the same time can offer educational content, such as wine tasting notes required for users to make informed decisions.
Martin says that there is no particular objection to an ecosystem of self-managed private client portfolios growing up around the platform.
A key differentiator stressed by Martin as to the platform’s reach is the data.
“We partner with Wine-Searcher (http://www.wine-searcher.com), who collect wine prices from 25,000 wine merchants globally,” he says. “We receive a raw data feed from them, our statistician processes the raw data through our outlier processing and pricing algorithms to arrive at a ‘Market Level’ price.
“Market Level is a price at which a collector’s wine is most likely to sell based on the price distribution of the same wine ‘in market’, how those prices cluster, and scarcity. We update these prices weekly.”
That said, wine is not liquid enough an asset to offer real time pricing, and some wines have deeper liquidity than others – for example, Bordeaux, because there is more of it and it has historically accounted for a significant share of the fine wine market.
The data capture also means that users can view price charts of individual vintages of wine, regional prices, and chart comparisons against, say, the performance of the FTSE index.
For those looking to trade wine, the platform offers a different take again, Martin suggests, based on matching bids to portfolios, not just offers. From some £35m of wine investments represented by the platform in late September, Martin is expecting this to grow by some £9m monthly, taking it to around £100m in the coming year.
Transparency is key, however, because wine is non-fungible as an asset: the buyer always has the last word, and as bidders they can even ask for an inspection post trade but before settlement.
What will help build the business is additional technology. Martin says that Wine Owners is looking to launch multilingual and multicurrency capabilities. This has been going through a testing phase before release. Additionally it should allow people to develop their own indices for comparison against their wine portfolios.
Another change will make the website fully responsive. This means it will work across tablets, trading screens, and mobile devices, adjusting itself to offer users a different view depending on which type of device they use to access the service. An App will come eventually, but for now Wine Owners offers a widget that can do quick searches for prices.
The UK provenance of the service retains certain advantages, however, such as the ability to keep wine in bonded warehouses, where investors can maximise tax efficient investing, particularly if based in jurisdictions that are less friendly on this basis.
However, the additional functions being developed are intended to make this the type of platform that will appeal to a broader set of investors across markets outside the UK.