FT features Bordeaux wines’ blue-chip status and points to up to 15% growth

The Financial Times recently featured an article on Bordeaux’s preeminence in the fine wine investment sector despite the rise in market share of a few key wines from other regions.

David Elswood, international head of wine at Christie’s auction house states: “Although Bordeaux is going through a period of changing prices, it remains the number one category of wine in all our salerooms globally.”He goes on to expand on the point and comments thatBordeaux represents 75 – 80 per cent of their global sales in fine wine.

One of the key reasons for Bordeaux’s status as ‘blue-chip’ and essential as components of a wine investment portfolio is the scale of the production of investment-grade wines in the region and the mature secondary market in these wines. The liquidity this market affords ensures investors can exit more readily when their investment goals have been met:

Justin Gibbs, founding director of Liv­ex, says: “Bordeaux remains the main play. Wine funds must be in this space, where there is a tighter spread between bid and offer, and therefore a lower cost of trading.”

This view is in line with our own; Bordeaux represents the ‘mainstream wine investment’, offering more surety on future trading in the wine with known markets for them. A diversified portfolio will have key vintages and brands of Bordeaux along with a suitable percentage of wines from regions including Burgundy, Rhone, Champagne, Tuscany, California, Spain and Australia.

The FT article also questions how an investor can determine which is the best vintage to invest in? Jeff Zaharia, president of Zachy’s wine auctions in the US, says of the 2009s and 2010s: “These are two great vintages, both have come down in price over the last few years and seem to have bottomed out. I look for these wines to come up 5 per cent to 15 per cent over the next few years.”

Vintage quality obviously impacts on investment performance and 2009 and 2010 were extraordinary and are recognized by the industry as the two finest vintages of the 21st Century to date. Whilst there are arguments to hold some of your portfolio in lesser vintages we strongly believe that the ‘backbone’ to a robust wine portfolio should include blue-chip Bordeaux First and Second Growth wines of the 1855 classification from the 2009 and 2010 vintages, especially when acquired at the prices currently on offer.  

Furthermore the FT article also concurs with our view on 2005 and notes the “2005 vintage as a must for every cellar. Parker rescored the 2005 at the end of June and many expect prices could rise dramatically for some châteaux.” We have already witnessed some effect from the rescore and the justified recognition by Parker and other key critics of the outstanding quality of the 2005 vintage.

Bordeaux continues to offer great opportunities for capital growth in the medium to long term and recent research by Liv-ex points to Lafite 2010 as a classic example. Scored at 99 points by Suckling, 98 by Parker and his heir apparent, Neal Martin, rates it at 99+ labelling it “a future legend”. It was released en primeur at £12,000 (12 x 75) and with Lafite’s brand status and prices surging with the Asian market demand at that time it was commanding an average 130 per cent premium over other First Growths.

The subsequent market decline in Bordeaux First Growths hit Lafite hardest and following a three-year period in the doldrums the price has stabilised in the last six months. Now trading at 55 per cent below its release price, Liv-ex asks – can the price get any lower? Certainly sharing our view – there has probably never been a better time to buy Bordeaux.

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