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Investment in Fine Wine

Written by Jon Cooper

As the UK passes the fifth anniversary of the interest base rate being at a historic low of 0.5%, this leaves businesses and individuals who have cash earning little return from holding these funds on deposit in a conventional bank or building society account.

For investors looking for a higher rate of return, there are a number of options – share portfolios, property, crowd funding and peer-to-peer lending a just a few.

One growing sector is investment in Fine Wine.  Whilst this seems exotic and glamorous, it is crucial to understand how the system works and the risks that are involved.

In Bordeaux, with the notable exception of Chateau Latour, the ‘en primeur’ or wine futures market operates.  This allows the chateaux to offer for sale some of their wine that is still in the barrel.  For instance, the en primeur market for 2012 is still open but the wine will not be available for shipping until autumn this year or spring 2015.  Similarly, this month the market for the 2013 vintage will open.

Important considerations are that a chateau set their price based on barrel samples that are only six to eight months old and that, once the price is set, it does not change.  The result is that the wine is available at price before the finished product is tasted by the extremely influential wine critics.

For the chateau, this provides much-needed cashflow.  For the investor, there is the opportunity to secure wines from classified Bordeaux estates of very limited quantities and that would be difficult to obtain and, potentially, much more expensive after they are released.

Alongside Bordeaux, Burgundy, the Rhône Valley and Port also operate an en primeur system.

There are, however, two important considerations.  Firstly, wine has to be seen as a delicate investment with the potential for either a loss or a considerable profit and, to this end, no investment should be made without thorough research.

Secondly, the investor is not able to purchase directly from the chateau and, as a result, has to operate through a broker.  As the product does not exist at the time of purchase, this does create the opportunity for fraud especially on the internet with a number of bogus brokerages having been exposed in recent years.

At CooperFaure, we have extensive knowledge of this sector and if you would like more detailed guidance on investment in Fine Wine, please contact admin@cooperfaure.co.uk to arrange a consultation.

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