Few commodity investments tempt the palate like a wine fund. Wine is free from capital gains tax, has outperformed the FTSE 100 considerably in recent months and is a covetable status symbol.  For clients who wish to drown their current sorrows, London-based Lunzer Wine Investments is a new alternative fund manager aimed at institutions and high net worth individuals.

The company is headed up by Wine Investment Fund director Peter Lunzer, who has a class track record of 21 per cent annual investment growth over six years via a proprietary investing model – the Wine-Price Ratio model. Mr Lunzer told WealthBriefing that he and two other experts will plot this ratio based on their understanding of data from Liv-ex, the fine wine exchange. 

The first five years of Mr Lunzer’s track record was spent as chief investment officer for The Wine Investment Fund, which he co-founded. From 2003 to 2008 the fund returned an increase of 108 per cent net of all fees.

The company already manages wine investment portfolios, for clients, valued in excess of £10 million. It will initially offer to manage wholly owned, dedicated portfolios for institutions, private offices and high net worth individuals. Its first fund is set to launch early 2009.

“The advantage, in terms of picking wines, is to understand not just the nature of a wine as it matures, but to understand the way that its value evolves. For example, some wines pass through adolescent stages of maturity, which makes their flavours more challenging. Similarly, as vintages are consumed, they become scarcer.

"It is the understanding of how they emerge from these stages and the effect that this has on market values that will be most useful in picking future winners,” says Mr Lunzer. 

Lunzer Wine Investments will offer multi-investor funds, bespoke funds and fund management services. The fine wine asset class is tax free and has outperformed all other recognised traditional investments in the last 15 years. There is a minimum investment of £500,000 for institutions and £100,000 for private offices.

Investing in fine wine can reap strong returns. Simple supply and demand economics govern the wine market. Bordeaux in the south of France has the most stable financial market of all wine producing regions and its investment-grade claret is the top alternative choice, according to the Financial Times. In each decade, only a maximum of four vintages out of every ten have wines of a high enough quality for investment purposes.

A chateau can only produce a unique and finite amount of wine each year. As this is happening the wine is maturing deliciously, which leads to an increase in demand and a lucrative investment opportunity.

Mr Lunzer also recognises the success of champagne investments in recent months but sees it as a fashion-driven development. "What would happen if footballers stopped drinking it? We may look at champagne in future, if our in-depth analysis shows it is an appropriate option for our clients,"he told WealthBriefing.