Fine wine comment: Star spotting

 

Despite a slow start and a sharp correction towards the end, the last 10 years can be considered extremely positive for fine wine investors. In the decade dubbed the noughties, prices for the top Bordeaux wines increased 178% (as tracked by the Liv-ex Fine Wine Investables Index). This strong rise hides a wide variation in performance between different wines, however – so what was the best performing wine of the decade? 

If we take the wines in the Liv-ex Fine Wine Investables as our basis (and limit ourselves to those wines available for purchase in December 1999) the clear winner is Lafite Rothschild 1982. Priced at £2,613 per case at the end of the 1990s, it hit a price of £25,000 just 10 years later; a return of 857% and a compound annual growth rate of close to 26%.  

Those who had held onto their money for a year and a half and bought Carruades de Lafite 2000 on release in July 2001 would have achieved a marginally better return of 888% (£200 to £1,975). Although the additional costs involved in storing multiple cases of Carruades (at up to £10 per case per year) make Lafite’s performance marginally superior if the same amount of capital is deployed.

So how does the performance of Lafite 1982 compare to other assets? The best-performing equity on the London Stock Exchange (British American Tobacco) increased in price 454% over the same period, while gold prices were up 297%. Even Google’s IPO (which launched in mid 2004) fails to come up to the mark, having provided returns to its investors of just over 600%. Indeed, the only assets to have performed better appear to be a handful of emerging market equity funds. 

If we look at more general benchmarks, then fine wine has clearly proved itself one of the top-performing asset classes of the last 10 years. The returns provided by the Liv-ex Fine Wine Investables Index surpass those of equities, houses, oil, stamps and fine art. As the table below shows, only gold has outperformed wine over the period. 

Although undoubtedly impressive, fine wine’s performance in the noughties is actually inferior to that seen in the previous decade. The Liv-ex Investables Index saw a rise of 353% in the ‘90s, with much of that rise occurring in the mid part of the decade. Interestingly it is Lafite that is again the best performer from among the 1982s, showing a rise of 358% in the 10 years to December 1999 (up from £570 per case to £2,613). 

So what of the next 10 years? It would seem unlikely that we will have the same winner if we repeated this exercise in December 2019. Indeed, a similar growth rate for Lafite 1982 would result in a case price of close to £250,000. The winner, however, will almost certainly be a Bordeaux. One of the other first growths that is currently slumbering? Or a 

lesser wine (like Carruades) that captures collectors’ imaginations and catches the market unawares?

Asset (benchmark)            % change*        CAGR**

Gold (London PM Gold Fix)    297.9%        15.0%

Fine Wine (Liv-ex Fine Wine Investables Index)      178.3%        10.9%

Crude Oil (Brent Crude spot)    177.7%        10.9%

UK residential property (FT House Price Index)     118.2%        8.2%

Collectible Stamps (Stanley Gibbons 100 Stamp Index) 60.9%            4.9%

Fine Art (ArtPrice Index UK)       9.1%        0.9%

Equities (FTSE All Share)             -17.5% -1.9%

*31 Dec 1999 to 30 Nov 2009, all data in GBP, excluding fees and income.

**Compound annual growth rate.

Jack Hibberd, research manager, Liv-ex, 04.03.10