Back to Basics: Value for Investors in Bordeaux

Steve McConnell - Vin-X blogVin-X shines a light on the value to be found in traditionally-strong Bordeaux

Wine investment originated in Bordeaux, and until recently completely monopolised the industry. You know you’re talking about a dominant marketplace when an 80% market share represents a significant reduction in that share from previous years, and Bordeaux has always been dominant in the world of fine wine. However, you wouldn’t think so if you’d been reading the wine press in the last year or so. Much of the talk is about DRC and other Burgundies, Champagne, the Rhône, and even wines from Tuscany and further abroad. The reason for this is that Bordeaux prices have fallen in the last few years due to the over-exuberance of the Châteaux in 2011 – their prices were too high and investors, particularly the Chinese, found that they could buy better vintages for less money. The inevitable effect was a drop in price. While this has meant that those who purchased at the top of the market will have to hold out for longer, it is presenting fantastic opportunities for new investors, as well as seasoned veterans looking for the best possible value. Take a look at the graph below:

Liv-Ex 10 Year Trend

When compared to the long term trend of the market in the last 10 years, Bordeaux wines are significantly undervalued at the moment, more so now than at any time in the last 10 years. The 2011 correction may have been the result of wines being priced too high, but with some First Growths having actually fallen to lower than their initial release price, the value to be found is potentially staggering. So why aren’t people buying?

"Invest at the point of maximum pessimism."
-John Templeton, economist and investor

The Liv-Ex Bordeaux Indices have been going down for the last few years, and traders have become pessimistic. It’s much easier to sell something that has been doing well recently, and it feels much safer to put your money in something that’s going up rather than down. Therefore, recently, many wine brokers will attempt to sell you wine from Burgundy (the index for which is very high and beginning to look like it’s peaking), Tuscany (which does not have the same track record as an investment) or even some from further afield like South Africa and the USA. While there is sometimes a place for these wines in larger portfolios, the real money has always been in Bordeaux, it’s how wine investment became the globally recognised asset that it is. Vin-X believe that this will continue to be the case, and that there genuinely hasn’t been a better time to buy for many years. All you have to do is look at the numbers.