Against a backdrop of high inflation rates and a challenging environment, Gregory Swartberg, founder and CEO of London wine merchant Cru Wine, and Alexander Westgarth, CEO at wine investment firm WineCap, discuss why investing in fine wine is an attractive proposition. 

Fine wine, as an alternative investment, performs well in times of high inflation, acting as a hedge, Gregory Swartberg, at Cru Wine told this news service in an exclusive interview.

Swartberg, a 34-year-old Dutch wine enthusiast bought up in France, highlighted that wine investment is one of the longest standing alternative asset classes, offering effective diversification for an investment portfolio. It has shown strong performance against traditional asset classes with less volatility, as seen during the global financial crisis or the Covid-driven downturn two years ago. Since the inception of the Liv-Ex 100 benchmark in 2001, the market has returned 7.3 per cent on average per annum.

“Our aim is to deliver double-digit returns and our investment team has delivered an average of 11.8 per cent annualised gross returns,” Swartberg told WealthBriefing. 

Established in 2013, Cru Wine which is based in London and Bordeaux, is celebrating its 10th anniversary this year. It works with producers and suppliers to offer clients the opportunity to buy, store and collect wine. 

The firm has a data-driven, fine wine investment platform which enables clients to grow a portfolio and track its value online daily. It was listed in the FT 1000 Fastest Growing Companies in Europe 2023 for the fourth year running. The ranking lists those European companies which achieved the highest compound annual growth rate in revenue between 2018 and 2021. Despite difficulties resulting from the pandemic and continued economic uncertainty, Swartberg said the firm has achieved compound annual growth of 40 per cent.

Around the world, investment interest in fine wine has waxed and waned as a topic, sometimes cited as a source of added returns, and sometimes as a hedge against inflation or difficult traditional markets. It comes with its own language and idiosyncratic features. More data is becoming available around investing in traditional hotspots such as Bordeaux and Burgundy, as well a "New World" wine producing countries such as New Zealand, South Africa and Argentina. (See here for a story about some of these issues.) The rising affluent middle class of Asia, for example, has been a growth driver of the area. There are also parallels with markets for whisky, for example, or classic cars, fine art or even upmarket forms of chocolate.

Outlook
Cru Wine's Swartberg is excited about the new Bordeaux en primeur season – lasting until the end of June – which offers clients fine wines from the region. Following his team's visit to Bordeaux in April for annual tastings at châteaux, he believes that the vintage is an exceptional one.

He is also optimistic about the outlook for fine wine investment. He said that demand is growing in the US. Consequently, he plans to expand the firm’s presence there, most likely in the Napa Valley.

There is also a strong interest in fine wine in Asia, as a result of the new wealth and growing middle class there, notably in Hong Kong, China and Singapore, making the region attractive,” Swartberg continued.  

Study
A new report, released this week and commissioned by WineCap, Fine Wine: The Journey from Passion Asset to Mainstream Asset Class, also found that fine wine is featuring prominently in many wealth managers’ client portfolios. UK wealth managers and advisors estimated that over 40 per cent of their high net worth client base invest in fine wine with an average portfolio allocation of around 10 per cent.

The study – conducted among 50 UK-based wealth managers and financial advisers who only deal with high net worth clients (£100,000+/$126,000+) – revealed that fine wine will attract most demand from investors over the coming year amongst all leading passion assets, with 96 per cent expecting demand to increase, of which three out of five said that it will increase “significantly.”

This has placed fine wine ahead of watches (86 per cent) and luxury handbags (80 per cent) in second and third place respectively. Other well-established passion assets such as art (68 per cent) and classic cars (62 per cent) placed much lower in sixth and 10th place, the study reveals.

Alexander Westgarth, CEO at WineCap, said: “Fine wine has long been seen as a ‘passion asset’ – a fun and exciting yet niche investment option for connoisseurs and hobbyists. But over the past few years, characterised by increased market and economic volatility that have destabilised traditional assets such as equities and bonds, perceptions of fine wine have evolved from a passion asset into a mainstream alternative asset.”

“The fact that fine wine has received such a positive reception from wealth managers, whose success relies on advising clients on making the right investment decisions, is a testament to its growing appeal,” he continued. As the investment climate becomes even more challenging, squeezing returns from traditional assets, WineCap believes that fine wine’s appeal as an effective portfolio diversifier will continue to grow.