Fine wine can be a good investment, just like stocks, bullion and real estate. Many connoisseurs now purchase cases of rare, critically acclaimed wines in order to sell them when their value increases. David Jackson, CEO of London-based Amphora Portfolio Management — a firm that specialises in wine investments — tells you how the process works.
How did you get into the business of wine investment?
I was originally a stockbroker, but I live and breathe fine wine. So I looked at the market to see where there might be a chance to add value to the wine market. I noticed that a lot of people were investing in wine, but they were doing so badly. Traditional wine merchants were looking after their wine investment activities in good faith, and thought they were being helpful, when they were actually giving lousy advice. So I said hang on, there’s got to be an opportunity here. Wine has many of the characteristics of other luxury goods — there’s scarcity, desirability, they are generally expensive and are backed up by a good brand. But wine has different characteristics too. You can only use it once. It also takes a long time before it is ready to be used for its main purpose — 10-15 years sometimes. No other luxury good has that kind of incubation period. So if you look at that as a supply chain, someone’s got to look after it — buy it, store it, bankroll it. Wine changes in price and fluctuates over time. That’s where the wine investor comes in. If you love drinking fine wine, you need wine investors to bring it on to the secondary market.
Do you have many investors in India?
I first came to India with this business in 2014, and ever since, I have made around 30 trips here. As of now, Amphora has around 40 investors in India, mostly in Mumbai. I just went to New Delhi, so I know a few people there as well now. Bengaluru is on my list. The great thing about doing business here is that clients tend to become friends.Rajeev Samant of Sula is one of them and he is one of the reasons why our business in India is picking up. He’s very kind, and his portfolio has done quite well, which is why he started introducing people to the concept. Having an endorsement from someone like him has really helped. We have also recently partnered with Cecelia Oldne, who is a respected name in the wine business here. Having her on board is demonstrative of Amphora’s commitment to the India business.
Did it take some time to convince your first few investors here?
When I first came here, I met a lot of businessmen and influential people. They all listened and thought it would be a good idea. I left thinking that I would have at least 100 investors. By the end of the year, I had just half a dozen. Now, looking back, I realize that I was a foreigner who showed up here with a new idea, and at that stage it was going to be a slower rate of incline. But I saw the scale of change — moving away from whisky and beer and towards wine. These days, thousands of people go to wineries like Sula to learn about the winemaking process and understand it better. I realized it would take longer than I thought, so I made a real commitment to come here five to six times a year.
As an investment, how does wine compare to the stock market, bullion and so on?
Wine isn’t necessarily a better investment than stocks, bullion or oil, and we don’t market it as the great elixir of all investment. If you invest in bullion, oil etc, there’s one price, and there’s a graph going upwards or downwards. With wine, you’ve got all these different regions around the world to look at. There are hundreds of different producers, with different vintages and years of production, and from an investment perspective, these are completely unique products. You’ve got hundreds of different opportunities, and they all move at different rates, and at different times. It’s like a mini stock market. So rather than a binary decision, you can do all sorts of different, wonderful things. It’s also a nice way to diversify your portfolio.
How does the process work?
We’ve got a team that analyses the market, looking for the best opportunities. Some of them will be low risk, with low returns, while others will be higher risk, for any number of reasons. So if we meet someone in the UK, China or India, we’ll have to talk to them about what they’re hoping to achieve, how long they are looking to hold on to their wine, just get an understanding of their goals and then put together a portfolio that could meet that target. The wine then gets transferred to a warehouse in London in your name. From that warehouse, we can then sell the wine in the international market. It’s not a lifelong investment, so we need to be able to sell it easily. Over the years, we discuss how a particular wine has performed, and we could suggest if, maybe it has done really well, it could be sold, the profit crystallized and used elsewhere. It’s always a work in progress. It’s unusual that someone will invest in a portfolio of wine today, and it will look the same in three years. So we manage that process for them.
{ David’s top wines to invest in }
Chateau Margaux 2015
We first placed this into our clients’ portfolios in June 2016 at £4,300. Today it trades at £11,500, having peaked at £13,000 in June 2018 – an increase of over 200 per cent in 2 years.
Petit Mouton 2014
This was first placed in our clients’ portfolios in Jun 2015 at £775. Within 18 months, it had doubled in value and now sits at £2,300 – an increase of over 200 per cent.
Opus One 2010
This wine was first placed in our portfolios in August 2014 at £1,800. It is currently trading at £3,200 – a 78 per cent increase.
Produced with the permission of Liv-ex (www.liv-ex.com)
What is the average rate of return for investors?
The Liv-ex Fine Wine Index is universally considered a benchmark. So if you see the press talk about the wine market, so to say, they’d be quoting this index, which is a bundle of the most frequently traded wines. Long-term growth on these is a shade over 10 per cent, close to 11 per cent. But if we were to only do 10 per cent, there wouldn’t be any purpose of us being in the business. So we aim for far greater returns. The reason we can do much better, sometimes around 20 per cent a year, is because occasionally, you get a wine that goes up so stratospherically that people get a really significant profit on their investment portfolio in a short space of time, which gives the whole thing a shot in the arm.
What are the top performing wines in your portfolio currently?
Right now, the areas I’m more excited about might surprise you a little bit. Traditionally, you would find it wisest to invest in the top chateau from Bordeaux, and the very top chateau from Burgundy. At the moment, the top Bordeaux isn’t doing very much in the market, and the top Burgundy is at stratospheric prices. So the exciting area for me is the second tier of Burgundies that haven’t yet moved in the way that the top ones have. The marketplace is very polarised. There are wines trading from 130,000- 150,000 GBP per case to something that sells at 200,000-300,000 GBP per case. Italian wines are also very exciting. Over the last ten years, they have struggled to keep pace with the French wines. A little clutch of wines called Super Tuscans, though, has done really well in the last few years. It means some of the more traditional wines like Barolos, Brunellos and Barbarescos are showing good returns.
What is the size of your current portfolio?
We have a computer program in which we’ve put in all of the wines we’re interested in. There are as many as 3,000 that we are analysing and tracking the prices of. However, only around 300 of those are in our portfolio. Sometimes, we will choose to avoid a wine because the secondary market may present some sort of difficulty when it comes to selling the wine. If you can’t sell it, you can’t buy it. At the moment, our clients have a combined investment of around 20 million GBP in fine wine.
Would you add any wines to your portfolio on recommendations from clients?
Of course. Our business is also about experiencing and enjoying wine, which is why we do many tastings. But what we do say to our investors when they are starting out is that they need to be pragmatic about selling these wines in 3-5 years, and not get emotionally attached to them. You need to understand scarcity – every time a bottle from a particular vintage gets drunk, its value increases. Connoisseurs and collectors make their decisions very differently, so we have to adapt to all kinds of cases.
