The rise in value of luxury investments in 2021 helped to boost fortunes, and fine wine delivered the most gains to owners, according to Knight Frank’s annual survey of over 600 global wealth managers. One of the favourite passion assets of Ultra High Net Worth Investors, the latest independent analysis demonstrates wine’s value to all investors.
Wealth report findings for wine investors:
- A new wave of investment money is entering the market stimulated by macro-factors including wine’s ability to hedge rising inflation.
- Increasing demand as investors look to secure investment wines as climate challenges and supply chain issues impact availability and prices.
- Fine wine investments delivered average returns of 16% in 2021 (Source: Wine Owners, Knight Frank Report 2022)
- Champagne investments sold at auction saw an average 31% growth in the period – 2008 vintage key.
- Burgundy wine values rose an average 25% in 12 months
- Wealth managers forecast inflation and supply chain issues will continue to fuel rising demand in 2022.
- Fine wine investments may become digitised– Penfolds introduces the first NFT
In a collection of passion assets that also includes art, rare whisky, vintage watches, coins and classic cars, fine wine delivered the highest average returns in the Report’s review:
Top 5 Passion Assets in 2021:
| Asset | Average growth – 12 months | Average growth – 10 years |
| Fine wine | 16% | 137% |
| KFLII* | 9% | 123% |
| Watches | 16% | 108% |
| Art | 13% | 75% |
| Rare whisky | 9% | 428% |
| Coins | 9% | 64% |
KFLII– Knight Frank Luxury Investment Index – average performance of ten passion assets
Source: Knight Frank Wealth Report 2022, data sources: Art Market Research (art, coins, watches), Wine Owners (wine), Rare Whisky 101.
How does fine wine investment compare to luxury residential property?
Record breaking sales volumes at auction houses in 2021 saw an average growth in wine investments of 16%, in the same period the average global value of luxury residential property rose 8.4%.
Why do the world’s super-wealthy acquire passion assets?
- For the joy of ownership
- To provide a safe haven for their capital
- For investment returns
Globally, UHNWIs have an average of 16% of their investable wealth in passion assets, 17% in the UK. Wealth managers expect that 25% of their clients will increase their investment in luxury collectibles in 2022.
The global rebound from the pandemic saw an increase of 9.3% in the number of UHNWIs in 2021 compared to 2020, i.e. an extra 52,000 new, super-wealthy consumers of luxury goods. These numbers are expected to grow by 28% by 2026, five years from the 2021 data under review.
What can we learn from changing UHNWI investment trends?
- The ten-year growth of UHNWIs (assets of more than US$30million) is predicted to rise from 348,355 in 2016 globally to 783,671 in 2026.
- Knight Frank estimates that 129,557 UHNWIs are under 40 years old and self-made. Young UHNWIs are more global, tech savvy and place greater emphasis on well-being investments – in themselves, family, and the environment.
- Four ‘unstoppable’ investment trends: climate, cyber-security and digitisation, longevity and healthcare, the rise of Asia.
- Sustainability needs to be integrated into an investment portfolio.
- Rising take-up of crypto investments point to a future trend
- The global distribution of wealth is changing, wealth managers forecast that Asia will overtake Europe as the second largest regional wealth hub (to the US) in 2026.
- Wealth managers advise ‘genuine diversification’ of assets with varying liquidity profiles.
- Increasing investment in passion assets.
How will UHNWIs influence wine investment?
- A finite supply of investment wines has to satisfy a growing number of investors. With climate challenges already seeing production in some key regions fall. As investment wines become rarer their prices should naturally rise.
- Producers of investment wines with strong sustainability and ESG (Ethical, Social, Governance) agendas will become more attractive and valuable to investors.
- Younger UHNWIs are increasingly requesting their wealth managers to invest 1 – 5% of their portfolio in crypto. Blockchain tech is already being applied to wine investments. Penfolds are reportedly the first to do so launching an NFT meeting the demands of a new generation of investors
How much did passion assets return to investors in 2021?
It’s all in the name – collectors will pay whatever necessary to own their desired ‘passion asset’. Auction sales can also drive prices higher than current market value as competition to achieve ownership of unique and highly rare collectibles is heightened in the ‘heat of the moment’. Standout sales in 2021 include the following:
Most valuable Passion Asset auction sales in 2021:
| Asset | Item | Value |
| Wine | Piece des Presidents, Corton Renardes Grand Cru. Hospice de Beaune auction, 2021 | US$900,000 |
| Art | Pablo Picasso’s Femme assise près d’une fenêtre (Marie Thérèse) | US$103.4M |
| Car | 1995 Maclaren F1 – pristine condition, 350km on the clock | US$20.5M |
| Coloured diamond | 15.81 carat Sakura vivid purple/pink diamond | US29.3M |
| Watch | Philippe Dufour, two train minute repeating grande and petite sonnerie | US$5.2M |
Source: Knight Frank Wealth Report 2022, Wine: Sotheby’s
Find out more about owning luxury collectibles
For more information, see the Knight Frank Wealth Report 2022 and for details on collecting and investing in fine wine see our specialist Wine Investment Guide and speak to a member of our expert team on 0203 384 2262.