Warren Buffet endorses fine wine investment as a profitable safe haven

It’s not new news that fine wine investment is seen as a profitable save haven. It has a demonstrable track record of delivering long-term stable growth and protecting capital during periods of economic stress and recession. 2020 has illustrated this asset performance with absolute clarity during a global pandemic and it’s not just those that work in the industry that see the value of diversifying an investment portfolio with fine wine. Two key investor publications have commented this week, with Forbes observing:

“…many of the biggest names in investment are turning to a little-known alternative investment with huge potential. Endorsed even by Warren Buffett himself, wine offers a safe yet profitable haven for your capital, with very low correlation to the stock market.” Forbes Magazine, 20 October 2020.

 “If you had invested $100 in the fine wine market in 1952, your investment would now be worth $420,000. On the other hand, $100 invested in the stock market would now be worth a modest $100,000. Recent research shows that, thanks to this impressive track record, the majority of financial advisors would support investing in fine wine as a way to diversify certain client portfolios.” Forbes Magazine, 20 October 2020.

Collecting fine wine can be highly rewarding. It is tax efficient and can diversify, de-risk and strengthen overall portfolio performance delivering strong long-term growth. It’s also proven to outperform other assets, and notably protect your hard-earned cash in troubled times.

Fine wine v FTSE100 to five years during Covid:

Index YTD % 1 year % 5 years %
Liv-ex fine wine 100 2.6% -0.3 28.5
Liv-ex fine wine 500 2.5% 0.3 31.6
Liv-ex fine wine 1000 1.0 -2.6 42.3
FTSE 100 -21.6 -20.2 -2.5

Source: Liv-ex.com 30th September 2020

Knight Frank Wealth Report 2020 update in October 2020 observes:

“We’re seeing a broadening of interest in the fine wine secondary market which is lending support to prices’ …. ‘We believe this is more about the broadening global interest in collectible wines and the beginnings of more efficient secondary market sales channels, that make it easier to reach a wider audience of buyers.” Knight Frank Wealth Report 2020 Update – October 2020.

Independent investment professionals and publications echo our own observations. An increasing number of investors are seeking the solidity of fine wines’ steadfast returns and low risk against the backdrop of unprecedented economic uncertainty, extreme volatility in financial markets and the UK’s worst recession on record. Recognition of fine wine as an investable asset benefiting from improved transparency and liquidity in the market, coupled with an advantageous tax treatment on profits, is attracting global investors. In our recent blog on fine wine performance we looked at key issues:

 Investors are weighing up:

  • Equities have had a rollercoaster year and will continue to be vulnerable to market volatility
  • Saving vehicles could deliver negative returns as the low interest rates environment combined with a likely increasing inflation eats away at value.
  • Commencement of more stringent, localised lockdown measures across the UK – uncertain economic impact and for how long?
  • Brexit negotiations going to the wire

Diversify to de-risk, protect capital and achieve growth

  • Fine wine remains stable during unprecedented economic distress and financial market volatility
  • Tangible asset with inherent value
  • Current Liv-ex 100 trend – stable 2.6% growth YTD
  • Individual fine wines delivering double digit growth
  • EXAMPLE: Sassicaia 2007 delivered 18.1% growth in September 2020
  • Historic long-term growth (plus five years) consistently outperforms FTSE and other assets

Investors should take advice from their financial advisors and look at the value of diversifying funds across assets, such as fine wine, that can strengthen and de-risk a portfolio in the current environment.

Warren Buffet endorses fine wine investment as a profitable safe haven and is clearly a happy wine collector. It is certainly worth understanding how you can benefit – contact us now on 0203 384 2262 for more information and download our Guide to Investing in Fine Wine.