Fine Wines set to perform strongly in 2011

Fine wines delivered returns of 40% in 2010, at the top end of their forecast for that year, and are set to continue to do well during 2011, predicts The Wine Investment Fund (TWIF)

Fine wines are predicted to have another good year in 2011, after delivering strong returns of 40.5% in the previous year (measured against the benchmark Liv-ex 100 index).

The heady performance of the asset class in 2010 was driven largely by demand from Asia, particularly China.

Fine wines hit the top end of their predicted performance for that year, beating TWIF’s forecast of 18%.

TWIF director Andrew della Casa sees another good year for wine in 2011, with a 21% rise.

The ‘bear’ scenario is 0% to +5% and the ‘bull’ scenario is +30% to +40%, he says.

Continued demand from China, as well as inflationary pressures-with institutional investors looking to hedge against risk with physical assets-are likely to drive performance, says della Casa.

Wine is unlikely to see returns in 2011 on the scale delivered for 2010, however.
The 2009 en primeur campaign had a  “pull up” effect on back vintages and drove high prices.

“On the 2010 en primeur campaign, although early signs are that the wines will be very good, it is hard to conceive of prices that will have the same sort of ‘pull up’ effect on back vintages that occurred [in 2010] this year [2011],” says della Casa.

But it all depends on China. Large fluctuations between the Chinese Renminbi and Sterling GBP exchange rates, combined with ongoing demand, could see returns of up to 40% in 2011.

If Chinese demand falls, prices of weaker vintages and wines in particular will suffer, TWIF says.

The Wine Investment Fund was launched in 2003 and invests in predominantly Bordeaux Cru Classe wine.

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