Fine wines — asset class worth investing?

Although this question has been posed to me multiple times in the last couple of years, what really triggered this post was a short piece done by Bloomberg on the back of a wine auction in which the presenters debated the prices of a wine auction where wines worth $2.8m from Chateau Margaux were sold.

First to just clear the misconception of the presenters — no the $2.8m was not the price of a single bottle of a 2009 vintage from Bordeaux or a case but that of a total of 238 lots of Chateau Margaux from 1900–2010. The highest price fetched was by a balthazar (that's equivalent to 16 bottles) of a 2009 Chateau Margaux of $98,000.

Investing in fine wines is thus, first and foremost to do with exclusivity and uniqueness. Here are the key factors:

• The producer: Great producers who own great, exclusive vineyards and who have a reputation of a severe, conscientious selection could be rated much higher than their next door neighbour, with their wines out-selling and out-pricing their neighbours in multiples of five or ten.
• The terroir: So a Grand Cru from Burgundy or a higher rated Chateau from Bordeaux in general would fetch more than a premier cru which will fetch more than a village wine.
• The vintage: The better rated the vintage, the better rated the wine. So a 2005 or a 2009 or 2010 from Bordeaux would sell in multiples of what a 2011 or 2012 would fetch for the same producer.
• Storage: A wine that has been stored at the cellars of the producer would sell for more compared to the same wine stored in a recognized commercial storage.
• Age: An older aged bottle of a great vintage obviously with life left will sell for a lot more than a recent great vintage.
• Investment horizon: Be prepared to hold these wines for a minimum of 10–15 year horizon.

In summary, if you want to invest in fine wines: Look to invest in underlying asset rather than investing in the index — worst case scenario you can actually drink that amazing stuff someday. Invest in high quality bottles that have ageing potential of a few decades. Ensure proper, recognized commercial storage. And like any other asset class, take time to educate yourself. This learning journey is an absolute joy.

You see, unlike blue chip stocks that, in rare instances, can go bankrupt and disappoint, a fine wine properly sourced and cellared will always be there to please.