Fine wine profile: The Wine Investment Fund

Hard though it is for producers and importers to hear, let alone absorb, for a fine wine fund such as The Wine Investment Fund, taste is irrelevant.

This is because, in the words of investment manager William Grey, “we are a pure money-making machine”.

Experience and understanding of the market, however, is crucial, and the fund’s success – double-digit returns for investors from its first two five-year tranches – comes from a mix of market analysis and modelling, as well as “gut feeling” from Grey, who has 15 years in the trade spent at Fine & Rare and more recently, Armit.

Lending numerical weight to Grey’s instinct is Chris Smith, fellow investment manager and wine enthusiast, employed for his analytical powers honed as a former economist for the government.

“It’s an inexact science but with Chris’s modelling we can break it down,” says Grey about how the fund maximises returns using ceaseless monitoring of vintage, château and Parker score to “tell us whether it’s a strong buy, strong sell, or hold”.

Key to The Wine Investment Fund’s approach is the “Price Step Theory”. This, according to company director Andrew Della Casa, centres on the simple idea that “prices don’t go up in a linear fashion and we hold the wine when the price steps up”.

In the fund’s seven-year history he identifies three of these “jumps” and says, “arguably there is a fourth now”.

However, he also points out that in terms of any individual label, “there are always price steps happening, the key is buying the right wine at the right time”.

Currently, Grey identifies Cheval Blanc ‘98 as a possible wine in line for a price increase. “It’s a great wine that hasn’t moved for ages. It’s still considered a 93-point wine, which was Parker’s original score, but he revised it upwards. At some point everyone will realise it’s an interesting wine from a great right bank vintage, and it’s still sitting at £4,000 [a case].”

Della Casa stresses that the fund is “low risk”, achieved by its Bordeaux only policy, and within that region, a focus on just the top 5%, or 160 lines of stock. Further, “one wine would never form over 10% of a portfolio, and no more than 25% for one château, even Lafite”, adds Grey. Also, the business doesn’t buy en primeur because “there’s greater risk for no additional return”.

With as much as £40m locked up in the business, Della Casa says “we are probably the largest fund,” and suggests that £300 million in total is held in wine funds from a fine wine market worth £6-7 billion.

Such are the benefits of investing in wine, Della Casa comments, “Fine wine is an asset class worth thinking about from a serious point of view.” For him, the business is pure investment management – “we happen by chance to be using fine wine to do what we do”.

Interestingly however, Grey does display some emotion in his wine buying decisions, “I won’t touch Carruades [de Lafite] on principle,” he states. Although he quickly qualifies the comment: “it’s the most overpriced wine you can find, so it’s high risk”.

Patrick Schmitt, 01.07.2010