What Are The Risks?
In our view, the risks associated with fine wine are opportunities for our clients. Our role is to ensure that you are aware of the risks associated with investing in wine, and to minimise them on your behalf.
Potential risks include:
Price: Fine wine prices are subject to fluctuations and prices may fall as well as rise, even though historically fine wine prices tend to be less volatile than the financial markets. You can read more about how fine wine performs as a whole on the Liv-ex website. There are a few fine wine buyers in the world that have sufficient wealth to weather all economic downturns and it makes sense to populate our clients’ portfolios with fine wines that are targeted by this select few. This selection strategy has been proven to protect our clients’ money during downturns where their portfolios have shown tremendous resilience as demand for their holdings is sustained by billionaires around the world.
Wine: Fine wines purchased on your behalf meet the highest standards in the market. Each case of wine purchased for your portfolio undergoes a meticulous checking procedure to ensure perfect provenance and condition. However, there can be no guarantees regarding the development of the wine over time so there is the possibility that the wine’s actual value may be less than its anticipated value. In addition to this, reports show that less than one bottle in a hundred may well have negligible value in the market. All our clients have an unequivocal guarantee from us that they will receive full refunds on defective bottles and that we will make good on any future claims relating to your wine that we sell on your behalf.
Storage and Insurance Risk: We store our clients’ portfolios in the cellars of Octavian Vaults, the world’s leading fine wine storage experts. Our clients’ portfolios are protected by Octavian’s comprehensive insurance policy that guarantees direct replacement of the wine where possible and cash payment at market value at the time where not possible. Wines stored at Octavian’s cellars can command significantly more than wines stored elsewhere and this is an example of how we ensure that our clients’ portfolios are the most sought after, and therefore valuable, in the market.
Liquidity: Fine wines are not as liquid as fixed income and equity asset classes. Sometimes transactions can take weeks, even months, to execute at the desired value. To ensure you can turn your portfolio into cash when you need it, we guarantee to buy your wine and send you a cheque on receipt of your wine sale instruction form. To give you an idea of how long this might take, 90% of our wine sales to date have been concluded within 30 days of receiving the instruction to sell.
Economic Conditions: Wider economic issues may have an effect on the wine market. Fluctuations in interest rates, exchange rates, credit availability, inflation rates, industry conditions, government regulation, competition, technological developments, political and diplomatic events and trends, tax and other laws must be considered. None of these conditions are within our control, and may be developments that cannot be anticipated. Many of these factors have little impact on the wine market, which tends to recover more quickly than other markets. To give an example, currency fluctuations might lead to a softening in demand from one economy but make the wines commensurately less expensive and more attractive in another.