VALANDRAUD - COMTE VOGUE CHAMBOLLE MUSIGNY - LUNE …

VALANDRAUD - COMTE VOGUE CHAMBOLLE MUSIGNY - LUNE ARGENT - GRAND PUY LACOSTE - GIACOMO CONTERNO BAROLO CASCINA FRANCIA - RIOJA ALTA RIOJA GRAN RESERVA 904 - DUHART MILON - CECILIA BERETTA VALPOLICELLA CLASSICO SUPERIORE TERRE DI CARIANO - CHAPOUTIER ERMITAGE MEAL - GUIGAL COTE ROTIE TURQUE - JOSEPH FAIVELEY MAZIS CHAMBERTIN - LEOVILLE BARTON - TORBRECK RUN RIG - GUSBOURNE BLANC DE BLANCS - PONSOT CHAPELLE CHAMBERTIN- DRC RICHEBOURG - LYNCH BAGES - BOUTISSE - DUCRU BEAUCAILLOU - MEYNEY - PETIT MOUTON- DOMAINE LEFLAIVE BATARD MONTRACHET - TROTTEVIEILLE - PELICAN ARBOIS SAVAGNIN OUILLE- MIRAVAL COTES DE PROVENCE ROUGE - BEAUSEJOUR DUFFAU - PONSOT CLOS ROCHE VV- SASSICAIA - LAMBRAYS CLOS LAMBRAYS - POUJEAUX - DOMAINE LEFLAIVE BIENVENUES BATARD MONTRACHET - LATOUR - ARMAND ROUSSEAU CHARMES CHAMBERTIN - MOET & CHANDON DOM PERIGNON - DOMAINE LEROY CLOS VOUGEOT - BAHANS HAUT BRION - BENJAMIN LEROUX PULIGNY MONTRACHET CHAMP GAIN - MASSETO - MICHEL OGIER COTE ROTIE- GAJA SORI SAN LORENZO - GAZIN (POMEROL) - TUA RITA REDIGAFFI - LAVILLE HAUT

BRION - FARGUES - BIONDI SANTI BRUNELLO MONTALCINO RISERVA - SAINTAYME- PENFOLDS GRANGE - GEORGES NOELLAT NUITS SAINT GEORGES CRAS - HARLAN

PROPRIETARY RED - FELTON ROAD RIESLING BLOCK 1 - JOSEPH FAIVELEY CHAMBERTIN CLOS DE BEZE - ARLOT ROMANEE SAINT VIVANT - CLOS ST JEAN CHATEAUNEUF DU PAPE DEUS EX MACHINA - EVANGILE - PONSOT GRIOTTE CHAMBERTIN - CLOS PAPES CHATEAUNEUF DU PAPE - BEYCHEVELLE - CLOS FOURTET - TAITTINGER COMTES CHAMPAGNE - FELTON ROAD PINOT NOIR CORNISH POINT - DOMAINE LEROY CORTON CHARLEMAGNE - FELTON ROAD PINOT NOIR CALVERT - JOSEPH DROUHIN GRIOTTE CHAMBERTIN - KRUG VINTAGE BRUT - MOET & CHANDON DOM PERIGNON ROSE - TIGNANELLO- BASSERMANN JORDAN JESUITENGARTEN GROSSES GEWACHS - PICHON BARON - MALARTIC LAGRAVIERE - DOMAINE LEROY VOSNE ROMANEE BEAUMONTS - ECHO LYNCH BAGES - DRC ROMANEE CONTI - GUIGAL COTE ROTIE LANDONNE - RUINART DOM RUINART - COMTES LAFON MEURSAULT GOUTTE D'OR - LEOVILLE LAS CASES - CANON GAFFELIERE - CANTEMERLE - CHAPELLE AUSONE - DRC ECHEZEAUX - FLEUR PETRUS - GRUAUD LAROSE - BRANE CANTENAC - CHAPELLE MISSION - CLINET- DRAGON QUINTUS - ORMES PEZ - OPUS ONE - DOMAINE LEFLAIVE

CHEVALIER MONTRACHET - LASCOMBES - DUJAC CLOS ROCHE- TERTRE ROTEBOEUF - BOLLINGER VV FRANCAISES - PAGODES COS- RONAN BY CLINET - MISSION HAUT BRION - CHENADE - GAJA COSTA

RUSSI - FOURRIER GEVREY CHAMBERTIN CLOS ST JACQUES - LOUIS ROEDERER CRISTAL ROSE - DOMINUS - CHAPOUTIER ERMITAGE BLANC OREE - PAUL JABOULET AINE HERMITAGE CHAPELLE - FELTON ROAD RIESLING DRY - CANON (SAINT EMILION) - CLARENCE HAUT BRION- FELTON ROAD PINOT NOIR BLOCK 5 - SMITH HAUT LAFITTE - COS

D'ESTOURNEL - LEOVILLE POYFERRE - PINGUS - HENRI JAYER NUITS SAINT GEORGES MURGERS - GEORGES ROUMIER CHAMBOLLE MUSIGNY CRAS - RAUZAN SEGLA - BRUNO GIACOSA BAROLO FALLETTO - DUJAC ECHEZEAUX - DOMAINE JEAN-LOUIS CHAVE HERMITAGE BLANC - CARRUADES LAFITE - VIEUX CHATEAU CERTAN

- LAFLEUR - JACQUES FREDERIC MUGNIER CHAMBOLLE MUSIGNY AMOUREUSES - PALMER - CHEVAL BLANC - ARROSEE - JOSEPH DROUHIN BONNES MARES - BOLLINGER RD - JACQUES FREDERIC MUGNIER MUSIGNY - VOUGERAIE BONNES MARES - LOUIS ROEDERER CRISTAL - TALBOT - PETIT VILLAGE - GUIGAL COTE ROTIE MOULINE- JOSEPH DROUHIN MUSIGNY - HAUT BATAILLEY - ARMAND ROUSSEAU CHAMBERTIN - CHAPOUTIER ERMITAGE PAVILLON - AUSONE - ROCHE BELLENE CLOS ROCHE - PICHON LALANDE - FRATELLI ALESSANDRIA BAROLO GRAMOLERE - PEDESCLAUX - BRANCAIA BLU - BRUNO GIACOSA BARBARESCO ASILI - CROIX BEAUCAILLOU - DOME - COMTE VOGUE CHAMBOLLE MUSIGNY 1ER CRU - HAUT BRION - SCREAMING EAGLE - TAITTINGER COMTES CHAMPAGNE ROSE - DOMAINE LEROY NUITS SAINT GEORGES BOUDOTS - DOMAINE JEAN-LOUIS CHAVE HERMITAGE - CLOS MARQUIS - FREDERIC MAGNIEN GEVREY CHAMBERTIN CAZETIERS - POL ROGER SIR WINSTON CHURCHILL

- PAVIE MACQUIN - LAFITE ROTHSCHILD - SOLAIA - BEAUCASTEL CHATEAUNEUF DU PAPE - QUINAULT L'ENCLOS - MOUTON ROTHSCHILD - SUDUIRAUT - MALARTIC LAGRAVIERE BLANC - GAJA BARBARESCO - PHILIPPONNAT CLOS GOISSES BRUT - ANGELUS- DOMAINE CHEVALIER - MONTLANDRIE - COMTES LAFON MEURSAULT CHARMES - SALON MESNIL - PETRUS - CONSEILLANTE - HENSCHKE HILL OF GRACE SHIRAZ - SAN GIUSTO PERCARLO - PONTET CANET - FELTON ROAD PINOT NOIR BANNOCKBURN - MONTROSE - PIN - BRUNO GIACOSA BAROLO ROCCHE FALLETTO - GIACOMO CONTERNO BAROLO RISERVA MONFORTINO - PEBY FAUGERES - CHAPOUTIER ERMITAGE BLANC ERMITE - PAVIE - CLARENDON HILLS ASTRALIS SHIRAZ - CASANOVA DI NERI BRUNELLO MONTALCINO TENUTA NUOVA - SAINT PIERRE - VEGA SICILIA UNICO - MARGAUX - TORTOCHOT CHAMBERTIN - BOLLINGER GRANDE ANNEE - COUTET (BARSAC)

- ARMAND ROUSSEAU GEVREY CHAMBERTIN CLOS ST JACQUES- CLERC MILON - CHAPOUTIER ERMITAGE ERMITE - HOSANNA - HAUT

BAILLY - COLGIN IX PROPIETARY RED - GAJA SPERSS - DRC TACHE- COMTE VOGUE CHAMBOLLE MUSIGNY AMOUREUSES - TRAPET PERE ET FILS LATRICIERES CHAMBERTIN - BEAUCASTEL CHATEAUNEUF DU PAPE HOMMAGE J PERRIN - JOSEPH PHELPS INSIGNIA - PONSOT CLOS VOUGEOT - BIONDI SANTI BRUNELLO MONTALCINO - EMMANUEL ROUGET VOSNE ROMANEE CROS PARANTOUX - PETIT CHEVAL

- PONSOT CLOS VOUGEOT VV - EGLISE CLINET - FORTS LATOUR- RIEUSSEC - CALON SEGUR - GEORGES ROUMIER BONNES MARES- DUJAC CLOS SAINT DENIS - FIGEAC - YQUEM - HENRI JAYER VOSNE

ROMANEE - RESERVE COMTESSE - TRAPET PERE ET FILS CHAMBERTIN- SCARECROW CABERNET SAUVIGNON - CRUZELLES - MONDOTTE- BRANAIRE DUCRU - ROTHSCHILD & CONCHA Y TORO ALMAVIVA- COMTE VOGUE BONNES MARES - TROTANOY - GAY - JANASSE

CHATEAUNEUF DU PAPE VV - PEGAU CHATEAUNEUF DU PAPE LAURENCE - JEAN-JACQUES CONFURON ROMANEE SAINT VIVANT- CLIMENS - ORNELLAIA - DOMAINE LEROY NUITS SAINT GEORGES

LAVIERES - PAPE CLEMENT - BERNARD DUGAT-PY CHAMBERTIN- FOURRIER GRIOTTE CHAMBERTIN VV - BONNEAU MARTRAY CORTON

CHARLEMAGNE - COMTE VOGUE MUSIGNY VV - PETER SISSECK (ALNARDO) PSI - DOMAINE LEROY VOLNAY SANTENOTS - GIACOMO CONTERNO BAROLO CERRETA - PAVILLON ROUGE - TROPLONG MONDOT - JEAN NOEL GAGNARD CHASSAGNE MONTRACHET BOUDRIOTTE ROUGEVALANDRAUD - COMTE VOGUE CHAMBOLLE MUSIGNY - LUNE ARGENT - GRAND PUY LACOSTE - GIACOMO CONTERNO BAROLO CASCINA FRANCIA - RIOJA ALTA RIOJA GRAN RESERVA 904 - DUHART MILON - CECILIA BERETTA VALPOLICELLA CLASSICO SUPERIORE TERRE DI CARIANO - CHAPOUTIER ERMITAGE

ECHO LYNCH BAGES - DRC ROMANEE CONTI - GUIGAL COTE ROTIE LANDONNE - RUINART DOM RUINART - COMTES LAFON MEURSAULT GOUTTE D'OR - LEOVILLE LAS CASES - CANON GAFFELIERE CANTEMERLE CHAPELLE AUSONE - DRC ECHEZEAUX - FLEUR PETRUS GRUAUD LAROSE - BRANE CANTENAC - CHAPELLE MISSION - CLINET - DRAGON QUINTUS - ORMES PEZ - OPUS ONE - DOMAINE LEFLAIVE CHEVALIER MONTRACHET - LASCOMBES - DUJAC CLOS ROCHE - TERTRE ROTEBOEUF - BOLLINGER VV FRANCAISES - PAGODES COS - RONAN BY CLINET - MISSION HAUT BRION - CHENADE - GAJA COSTA RUSSI - FOURRIER GEVREY CHAMBERTIN CLOS ST JACQUES - LOUIS ROEDERER CRISTAL ROSE -

DOMINUS - CHAPOUTIER ERMITAGE BLANC OREE - PAUL JABOULET AINE HERMITAGE CHAPELLE - FELTON ROAD RIESLING DRY - CANON (SAINT EMILION) - CLARENCE HAUT BRION - FELTON ROAD

PINOT NOIR BLOCK 5 - SMITH HAUT LAFITTE - COS D'ESTOURNEL - LEOVILLE POYFERRE - PINGUS HENRI JAYER NUITS SAINT GEORGES MURGERS - GEORGES ROUMIER CHAMBOLLE MUSIGNY

CRAS - RAUZAN SEGLA - BRUNO GIACOSA BAROLO FALLETTO - DUJAC ECHEZEAUX - DOMAINE JEAN-LOUIS CHAVE HERMITAGE BLANC - CARRUADES LAFITE - VIEUX CHATEAU

CERTAN - LAFLEUR - JACQUES FREDERIC MUGNIER CHAMBOLLE MUSIGNY AMOUREUSES - PALMER - CHEVAL BLANC - ARROSEE - JOSEPH DROUHIN BONNES

MARES - BOLLINGER RD - JACQUES FREDERIC MUGNIER MUSIGNY - VOUGERAIE BONNES MARES - LOUIS ROEDERER CRISTAL - TALBOT - PETIT VILLAGE - GUIGAL

COTE ROTIE MOULINE - JOSEPH DROUHIN MUSIGNY - HAUT BATAILLEY - ARMAND ROUSSEAU CHAMBERTIN - CHAPOUTIER ERMITAGE PAVILLON -

AUSONE - ROCHE BELLENE CLOS ROCHE - PICHON LALANDE - FRATELLI ALESSANDRIA BAROLO GRAMOLERE - PEDESCLAUX - BRANCAIA BLU - BRUNO GIACOSA BARBARESCO ASILI - CROIX BEAUCAILLOU - DOME - COMTE VOGUE CHAMBOLLE MUSIGNY 1ER CRU - HAUT BRION - SCREAMING EAGLE - TAITTINGER COMTES CHAMPAGNE ROSE - DOMAINE LEROY NUITS SAINT GEORGES BOUDOTS - DOMAINE JEAN-LOUIS CHAVE HERMITAGE - CLOS MARQUIS - FREDERIC MAGNIEN GEVREY CHAMBERTIN CAZETIERS - POL ROGER SIR WINSTON CHURCHILL - PAVIE MACQUIN - LAFITE ROTHSCHILD - SOLAIA - BEAUCASTEL CHATEAUNEUF DU PAPE - QUINAULT L'ENCLOS - MOUTON ROTHSCHILD - SUDUIRAUT - MALARTIC LAGRAVIERE BLANC - GAJA BARBARESCO - PHILIPPONNAT CLOS GOISSES BRUT - ANGELUS - DOMAINE CHEVALIER - MONTLANDRIE - COMTES LAFON MEURSAULT CHARMES - SALON MESNIL - PETRUS - CONSEILLANTE - HENSCHKE HILL OF GRACE SHIRAZ - SAN GIUSTO PERCARLO - PONTET CANET - FELTON ROAD PINOT NOIR BANNOCKBURN - MONTROSE - PIN - BRUNO GIACOSA BAROLO ROCCHE FALLETTO - GIACOMO CONTERNO BAROLO RISERVA MONFORTINO - PEBY FAUGERES - CHAPOUTIER ERMITAGE BLANC ERMITE - PAVIE - CLARENDON HILLS ASTRALIS SHIRAZ - CASANOVA DI NERI BRUNELLO MONTALCINO TENUTA NUOVA SAINT PIERRE - VEGA SICILIA UNICO - MARGAUX - TORTOCHOT CHAMBERTIN - BOLLINGER GRANDE ANNEE - COUTET (BARSAC) - ARMAND ROUSSEAU GEVREY CHAMBERTIN CLOS ST JACQUES - CLERC MILON - CHAPOUTIER ERMITAGE ERMITE - HOSANNA - HAUT BAILLY - COLGIN IX PROPIETARY RED - GAJA SPERSS - DRC TACHE - COMTE VOGUE CHAMBOLLE MUSIGNY AMOUREUSES - TRAPET PERE ET FILS LATRICIERES CHAMBERTIN - BEAUCASTEL CHATEAUNEUF DU PAPE HOMMAGE J PERRIN - JOSEPH PHELPS INSIGNIA - PONSOT CLOS VOUGEOT - BIONDI SANTI BRUNELLO MONTALCINO - EMMANUEL ROUGET VOSNE ROMANEE CROS PARANTOUX - PETIT CHEVAL - PONSOT CLOS VOUGEOT VV - EGLISE CLINET - FORTS LATOUR - RIEUSSEC - CALON SEGUR - GEORGES ROUMIER BONNES MARES - DUJAC CLOS SAINT DENIS - FIGEAC - YQUEM - HENRI JAYER VOSNE ROMANEE - RESERVE COMTESSE - TRAPET PERE ET FILS CHAMBERTIN - SCARECROW CABERNET SAUVIGNON - CRUZELLES - MONDOTTE - BRANAIRE DUCRU ROTHSCHILD & CONCHA Y TORO ALMAVIVA - COMTE VOGUE BONNES MARES - TROTANOY - GAY - JANASSE CHATEAUNEUF DU PAPE VV - PEGAU CHATEAUNEUF DU PAPE LAURENCE - JEAN-JACQUES CONFURON ROMANEE SAINT VIVANT - CLIMENS - ORNELLAIA - DOMAINE LEROY NUITS SAINT GEORGES LAVIERES - PAPE CLEMENT - BERNARD DUGAT-PY CHAMBERTIN - FOURRIER GRIOTTE CHAMBERTIN VV - BONNEAU MARTRAY CORTON CHARLEMAGNE - COMTE VOGUE MUSIGNY VV - PETER SISSECK (ALNARDO) PSI - DOMAINE LEROY VOLNAY SANTENOTS - GIACOMO CONTERNO BAROLO CERRETA - PAVILLON ROUGE - TROPLONG MONDOT - JEAN NOEL GAGNARD CHASSAGNE MONTRACHET BOUDRIOTTE ROUGEVALANDRAUD - COMTE VOGUE CHAMBOLLE MUSIGNY - LUNE ARGENT - GRAND PUY LACOSTE - GIACOMO CONTERNO BAROLO CASCINA FRANCIA - RIOJA ALTA RIOJA GRAN RESERVA 904 - DUHART MILON - CECILIA BERETTA VALPOLICELLA CLASSICO SUPERIORE TERRE DI CARIANO - CHAPOUTIER ERMITAGE MEAL - GUIGAL COTE ROTIE TURQUE - JOSEPH FAIVELEY MAZIS CHAMBERTIN - LEOVILLE BARTON - TORBRECK RUN RIG - GUSBOURNE BLANC DE BLANCS - PONSOT CHAPELLE CHAMBERTIN - DRC RICHEBOURG - LYNCH BAGES - BOUTISSE - DUCRU BEAUCAILLOU - MEYNEY - PETIT MOUTON - DOMAINE LEFLAIVE BATARD MONTRACHET - TROTTEVIEILLE - PELICAN ARBOIS SAVAGNIN OUILLE - MIRAVAL COTES DE PROVENCE ROUGE - BEAUSEJOUR DUFFAU - PONSOT CLOS ROCHE VV - SASSICAIA - LAMBRAYS CLOS LAMBRAYS - POUJEAUX - DOMAINE LEFLAIVE BIENVENUES BATARD MONTRACHET - LATOUR - ARMAND ROUSSEAU CHARMES CHAMBERTIN - MOET & CHANDON DOM PERIGNON - DOMAINE LEROY CLOS VOUGEOT - BAHANS HAUT BRION - BENJAMIN LEROUX PULIGNY MONTRACHET CHAMP GAIN - MASSETO - MICHEL OGIER COTE ROTIE - GAJA SORI SAN LORENZO - GAZIN (POMEROL) - TUA RITA REDIGAFFI - LAVILLE HAUT BRION - FARGUES - BIONDI SANTI BRUNELLO MONTALCINO RISERVA - SAINTAYME - PENFOLDS GRANGE - GEORGES NOELLAT NUITS SAINT GEORGES CRAS - HARLAN PROPRIETARY RED - FELTON ROAD RIESLING BLOCK 1 - JOSEPH FAIVELEY CHAMBERTIN CLOS DE BEZE - ARLOT ROMANEE SAINT VIVANT - CLOS ST JEAN CHATEAUNEUF DU PAPE DEUS EX MACHINA - EVANGILE - PONSOT GRIOTTE CHAMBERTIN - CLOS PAPES CHATEAUNEUF DU PAPE - BEYCHEVELLE - CLOS FOURTET - TAITTINGER COMTES CHAMPAGNE - FELTON ROAD PINOT NOIR CORNISH POINT - DOMAINE LEROY CORTON CHARLEMAGNE - FELTON ROAD PINOT NOIR CALVERT - JOSEPH DROUHIN GRIOTTE CHAMBERTIN - KRUG VINTAGE BRUT - MOET & CHANDON DOM PERIGNON ROSE - TIGNANELLO - BASSERMANN JORDAN JESUITENGARTEN GROSSES GEWACHS - PICHON BARON - MALARTIC LAGRAVIERE - DOMAINE LEROY VOSNE ROMANEE BEAUMONTS - ECHO LYNCH BAGES - DRC ROMANEE CONTI - GUIGAL COTE ROTIE LANDONNE - RUINART DOM RUINART - COMTES LAFON MEURSAULT GOUTTE D'OR - LEOVILLE LAS CASES - CANON GAFFELIERE CANTEMERLE - CHAPELLE AUSONE - DRC ECHEZEAUX - FLEUR PETRUS - GRUAUD LAROSE - BRANE CANTENAC - CHAPELLE MISSION - CLINET -

Why Alternatives?

Which Alternatives for the

Current Environment?

Fine Wine’s Credentials

Fine Wine’s Impact on a

Portfolio

Appendix 1, 2 & 3

04

05

06

11

12

Contents

4 Cult Wines | wineinvestment.com

Key Highlights:

• Alternative assets are growing in prominence as they offer diversification, hedges against traditional market risks and enhanced return opportunities.

• Real assets can be particularly attractive amid expensive equity and bond markets that are susceptible

to shifts in government and central bank policy.

• Fine wine’s track record of low volatility and low correlation to equity markets make it a suitable option

for an alternative asset allocation.

• The supply-demand dynamics, accessible entry points, and ongoing growth of the fine wine market

support its credentials as an alternative investment.

A healthy investment portfolio will have a range of assets to target diversified sources of return and to provide stability. Increasingly, investors are incorporating exposure to so-called alternative assets into their investment portfolios. Some studies expect alternative assets to grow by nearly 10% per year over the next five years. In this report, we look at the potential benefits of alternative assets and examine how fine wine’s performance track record and market dynamics make it an attractive option to include in an alternative asset exposure.

Executive Introduction

Why Alternatives?Alternative assets are any asset other than the ‘traditional’ equity, bond and currency investments. One type covers financial instruments that take alternative approaches to investing such as hedge funds, private equity, or distressed funds. Another category involves ‘real’ or physical assets ranging from commodities, precious metals, real estate, as well as ‘collectibles’ such as art, antiques, watches, classics cars and, of course, fine wine. Today, cryptocurrencies and non-fungible tokens are also gaining acceptance as viable investment alternatives by wider audiences.

The various alternative assets can have very different qualities and investment characteristics but many of these assets often have lower liquidity than mainstream markets, can be traded privately as well as publicly, and might have limited data or verified track records of performance. While these traits bring with them unique risks, the potential benefits of alternative assets can make them natural and important elements of long-term investment planning.

Benefits of alternative asset allocations:

1. DiversificationAlternative assets can help de-link an investment portfolio’s performance from the ups and downs of the economic cycle. Traditionally, investment portfolios typically include a mix of equities and bonds, often along the ‘classic’ 60-40 benchmark ratio. Investors can add diversification through foreign currency assets and by spreading investments across different industry sectors or geographic regions. However, this may not provide performance diversification if the asset classes remain correlated to each other. Alternative assets’ returns often have lower correlation to the traditional asset classes.

2. Hedge against market risksAlternative assets’ different drivers of performance often mean the risks facing equities or bonds will not impact them in the same way. This is not to say alternatives are completely insulated from market risks, but their different market dynamics can provide a degree of separation from volatility in mainstream financial markets.

3. Potential enhanced returnsAlternative assets can offer new frontiers for investors to identify alpha opportunities and boost the return potential of their portfolio. The market for many alternatives is often less developed and less efficient than traditional financial markets, opening the door for selective investors to uncover growth and arbitrage opportunities.


Which Alternatives for the Current Environment? The case for incorporating or expanding an allocation to alternative assets is stronger than ever. We believe ‘collectible’ passion assets can help with many of today’s investing challenges.

Since the global financial crisis (GFC), accommodative monetary policies have propped up equity markets and kept bond yields low or even negative. The COVID-19 pandemic has exacerbated this situation in many ways. Equity valuations are increasingly stretched, despite economic hardship, and increasingly concentrated in tech, meaning a mixed equity portfolio may not be as diverse as it first appears.

Many real assets form an attractive option in this backdrop as they are less susceptible to changes in economic outlook or shifts in macro policy than alternatives based on financial instruments, such as hedge funds. Even some real assets, including real estate and commodity prices, rise and fall with the economic cycle, with research showing how global equity, bond and commodity markets have grown more correlated since 2018. Gold, as a perceived safe-haven asset, will also see prices influenced by sentiment in mainstream markets.

Additionally, collectible or passion assets are typically characterized by lower liquidity than mainstream markets or even other alternatives. This means they can be harder to quickly buy or sell. While this does have downsides, reduced liquidity can also provide an advantage by insulating assets from panic selling. While a piece of news can alarm investors to such an extent that a stock or even a whole market can lose a significant portion of its value in a single day, less liquid assets won’t be affected at the same speed or even to the same extent.

Inflation is another risk that can erode the real return on any investment. The sharp bond market selloff in early 2021 illustrates the need to provide a hedge against inflation. Although oil and other commodities are more known as inflation hedges, many passion assets, such as fine wine, can help in a rising inflation backdrop as well. As real assets, collectibles have an inherent value and typically a more stable supply and demand dynamic.

Passion assets carry their own set of risks, as they are often less regulated than mainstream markets, have shorter track records or less data available for transparent decision making. They also can require higher entry points than traditional investing. It is of the utmost importance for investors to conduct rigorous research before selecting which alternatives match their specific requirements. Below, we analyse the potential benefits of fine wine for an alternative investment exposure.

Alternatives



These internal market dynamics form the primary drivers of fine wine prices, enhancing its suitability for many of the objectives of alternative asset investing in both the current backdrop and for the longer term. Fine wine’s main advantages include the following:

Low Downside Capture Fine wine returns display remarkable stability compared to a range of other asset classes during market downturns. For example, when the COVID-19 pandemic hit in early 2020, fine wine’s downturn was both shorter and less severe than most mainstream financial assets. At its 2020 low on 21 March, the Liv-ex 1000 had only declined by 4% compared with double-digit losses in most equity markets.

Things looked similar during the GFC of 2008-2009. The Liv-ex 1000 dropped roughly 10% from its peak in August 2008 to a low in December. At this point, it began a steady recovery, recouping all its losses by the end of 2009. By contrast, major equity indices plummeted by over 30%. Fine wine’s more consistent recovery from a shallower dip means it posted a higher total return over the full breadth of the GFC period (see Figure 1).

Typically, the value of a bottle of fine wine reflects a number of key factors:

• Supply and demand

• Brand recognition and prestige

• Vintage quality and volume

• Critic scores

• Drinking window

• Relative value



Figure 1. Calm during a crisisFine wine and major financial asset performance during GFC and COVID

Long-term stabilityFine wine prices demonstrate long-term consistency through a range of market backdrops. The result, illustrated in Figure 2 below, is fine wine’s notably lower long-term volatility compared to mainstream financial markets and even to other alternative assets, including commodities and gold.

Fine wine’s stability stems from its internal supply-demand dynamics. As a real ‘passion’ asset, demand for fine wine goes beyond its immediate benefit as a financial instrument. This does not mean fine wine is immune to downturns but demand for the product itself, rather than just as an investment, can temper price fluctuations.

Limited and stable supply levels also provide a steadying influence on fine wine. Only specific vineyards in certain wine growing regions have the necessary qualities and recognition to produce top quality wines. Leading producers make a finite quantity in each vintage as volumes are strictly controlled by the various Appellations d’Origine Controlee (AOC) in France and their equivalent in other countries. Consequently, supply of fine wine cannot significantly change by sudden shifts in policy the same way government and central bank policies can influence financial markets.

Source: S&P, Liv-ex, Bloomberg, iShares. Data as of 31 Mar 2021

Fine wine’s credentials: Calm during a crisis

11.1%

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-20.0%

-10.0%

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10.0%

20.0%

30.0%

40.0%

Yea

rly

Ret

urn

% yBloomberg Commodit

S&P 500

LVX1000

High-Yield Bond

Government Bond

2007-2009 2020-2021


Figure 2. Low volatility plus healthy returnsComparison of volatility and annualised return across financial assets (2007 – Mar 2021)

Fine wine also has an inverse supply curve, meaning supply shrinks with time as wine in consumed. This trait distin-guishes fine wine from both traditional assets as well as many other alternatives and enhances its stability over long time periods.

Low correlationFine wine’s low correlation to equity markets adds to its diversification credentials. While this type of diversification is useful amid all market backdrops, it is particularly important during unprecedented market environment when there is no comparison of how markets will behave going forward. Figure 3 shows fine wine’s lower correlation to the S&P 500 than those of other alternative assets over different time periods going back to the beginning of the GFC. The negative correlation of government bonds means their price tends to move in opposite direction of equities whereas the low correlation of fine wine, especially during the recent 2016-2021 period, means its price has little relationship to the S&P 500. Fine wine also exhibits low correlation to other asset classes. See Appendix 2 for details.

Source: S&P, Liv-ex, Bloomberg, iShares. Data as of 31 Mar 2021

Fine wine’s credentials: Low volatility, Healthy returns

Volatility (2007 to 2021)

Annualised Return (2007 to 2021)

Fine Wine Government Bond (7-10 year Treasury) High Yield Corporate Bond Gold Commodity S&P 500

-5% 0% 5% 10% 15% 20%-10%


Figure 3. Fine Wine’s low correlationCorrelation to S&P 500 by asset class (2007-2015 vs. 2016-2021)

Alpha opportunities Alternative assets can offer a new frontier for investors to identify alpha opportunities, and fine wine’s historic re-turns highlight how it can raise the return potential of a diversified portfolio. Since the end of 2007, the Liv-ex 1000 has posted a total return of 97% with impressive total returns over different time frames.

*Measurement period is taken from Nov. 2007 to Nov 2015 ** Measurement period is taken from Nov 2016 to Mar 2021Source: Liv-ex, iShares, investing.com. Data as of 31 Mar 2021

Fine wine’s credentials: Low Correlation

-0.60

-0.30

-

0.30

0.60

0.90

Government Bonds

High Yield Corporate BondC ommodity US Real EstateF ine Wine

Correlation (2007-2015*) Correlation (2016-2021**)

Government Bonds

High Yield Corporate Bond Commodity US Real Estate Fine Wine


Figure 4. Fine wine’s long-term growthTotal return – fine wine vs other asset classes

Equities have seen inflated returns in recent months on the back of stimulus programmes and a surging tech sector. However, fine wine’s ongoing growth potential stems from an increased diversity of supply and demand within the wine market. Helped by improving technology, new producers and regions are gaining attention of global buyers and driving the overall growth of fine wine investments. In 2020, the best performing regions within the Liv-ex 1000 were Italy, Rhone and Champagne rather than Bordeaux or Burgundy, the traditional heavyweights. Liv-ex has re-ported March 2021 was its broadest month on record in terms of number of distinct wines traded (1,440), surpassing a record set in November 2020. This indicates that many corners of the global fine wine market have yet to be fully discovered by a global audience, creating opportunities for alpha generation.

Accessible and flexible – Fine wine’s entry point is accessible when compared with many other alternative asset in-vestments. Investors can gain access to fine wine markets from as little as a few thousand pounds or even less to begin. Other alternatives such as direct property investments usually require a much larger initial investment. Even other ‘collectibles’ such as art or classic cars come with larger increments of investment.

Fine wine investments can also bring flexibility. Many other real assets must be sold at once, whereas wine invest-ments can easily be sold in variable size at different times.

Source: Liv-ex, investing.com. Data as of 31 Mar 2021

Fine wine’s credentials: Long Term Growth

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50.0

100.0

150.0

200.0

250.0

300.0

Nov-07 Sep-09 Jul-11 May-13 Mar-15 Jan-17 Nov-18 Sep-20

Bloomberg Commodity S&P 500 LVX1000 Gold High-Yield Government Bond Real Estate


Fine Wine’s Impact on a PortfolioTo take our analysis further, we’ve created a model mixed investment portfolio. In our view, a mixed investment portfolio can capture benefits of different alternative and traditional assets.

Figure 5 below shows that an example portfolio including fine wine (Portfolio E) would have delivered a similar return since the beginning of 2016 to other portfolio mixes. However, the fine wine inclusion would have meant a lower risk level and a higher Sharpe ratio, which is a measure of the average return of an asset in excess of the risk-free rate and relative to its volatility. In short, the higher the Sharpe Ratio, the higher an asset’s risk-adjusted return.

Figure 5 – Inclusion of fine wine improves risk-adjusted returnsModel portfolio performance 2016-2021

When it comes to portfolio construction, there is no single formula to build a comprehensive, diversified allocation to alternative investments. Depending on an investor’s return objective, time horizon and tolerance for risk, the selection of asset class will vary dramatically.

We believe the analysis in this report demonstrates that fine wine offers many of the benefits typically associated with alternative assets. With more investors seriously considering entering or increasing exposure to alternative assets, we are confident fine wine will generate growing attention from a global audience.

Source: Liv-ex, investing.com. Analysis by Cult Wines Ltd. Data as of 31 Mar 2021

Fine Wine’s Impact On A Portfolio


Appendix 1 - Indices

• Government Bonds - iShares 7-10 Year Treasury Bond ETF• High Yield Corporate Bonds - iShares High Yield• Commodities – Bloomberg Commodity• US Real Estate - ishares Core US REIT

Appendix 2 – Correlation across asset classes

Correlation 2016-2021

S&P 500 Gov’t Bond CommodityHY Corpo-rate Bonds

Real Estate Fine Wine

S&P 500 -0.39 0.58 0.79 0.73 0.07

Gov’t Bond -0.39 -0.43 -0.25 -0.11 -0.17

Commodity 0.58 -0.43 0.67 0.51 0.13

HF Corpo-rate

0.79 -0.25 0.67 0.72 0.18

Real Estate 0.73 -0.11 0.51 0.72 0.16

Fine Wine 0.07 -0.17 0.13 0.18 0.16

Appendix


Appendix: Benefits and challenges of investing in alternatives

Alternatives Benefits of Investing Challenges/Risk

Real Estate • Diversification • Relatively stable income return• Relatively low volatility (if holding direct

real estate)

• Substantial initial investment• Mismatch between pricing and valuation• Limited transactional information• Similar level of volatility to equity (if

invest in REIT)• Involve substantial operational and

maintenance fees

Commodity • Diversification • Inflation protection

• Volatility• Risk in losing more than initial amount

invested (derivatives)

Hedge Funds • Diversification across multiple hedge fund strategies available

• Long-term commitment required• Unfamiliarity with different strategies• Management Fees

Fine Wine • Long-term stability in different macro enviroments

• Less correlated to equity market• Real asset• Unique supply and demand mechanism• Possible tax benefits depending on tax

jurisdiction and personal situation

• Possible difficulties securing allocation• Liquidity • Market still in early stage of development

Art • Diversification• Possible tax benefits depending on tax

jurisdiction and personal situation

• Liquidity• Price discovery• Limited market data• Price realisation• Unregulated market

Appendix


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