Wine investment is booming – particularly since the start of the Covid-19 pandemic. Regular headlines champion it as giving greater returns than not only the major equity indices but also other so-called ‘alternative’ investments like gold, cars and handbags.
But what exactly is wine investment? Why do it? What are the potential gains and pitfalls? What kind of returns and time-scales are we actually talking? How to get the most out of it? And what does the future hold?
In this sponsored episode with fine wine merchant Oeno, we quiz Director of Wine Justin Knock MW as well as Chief Portfolio Manager Sid McNamara-Rajeswaran on all the above and more.
Susie Barrie MW (SB): Hello and welcome to Wine Blast, I’m Susie Barrie. And I’m here as ever with my husband and fellow master of wine, Peter Richards, who I’m slightly disappointed to say, is not wearing his Christmas jumper. Where’s it gone?
Peter Richards MW (PR): It’s true, it’s not here. So for those of you who caught the video of our last episode, we can exclusively reveal that I have taken off my Buddy the Elf Christmas hoodie.
SB: Peeled it off…
PR: It was a little bit like that, wasn’t it? It’s about five sizes too small. I’d like to say it’s the jumper that’s too small and not me…
SB: I think it was a good to clarify that, important. But it was good fun, wasn’t it, doing our Wine Blast Live? I hope you guys enjoyed it as much as we do because we enjoyed it.
PR: A bit too much…
SB: But the feedback’s been good. Let’s just take it. And we’re going to do more of that, Short form with videos
PR: Yes, Thank you. And do send us in your wine questions or fun challenges for us to do. We think that that will work really well for that kind of thing. We can’t promise we will always look as silly as we did in the last one. But we will definitely try to make it entertaining. And brief.
SB: We did achieve that, which is extraordinary, wasn’t it, for us?
PR: Yeah, we did it.
SB: On which we should get on with the show. And this one is all about wine investment. We’ve had quite a few questions and suggestions about investing in wine for the podcast. So it’s definitely been a subject we’ve been meaning to look out for a while now. And then recently, the Oeno group got in touch to say they’d be interested in collaborating on an episode. So that is what we’ve done. Plan came together.
PR: So, yeah, this is a sponsored episode with Oeno, which is spelled O E N O. Just to be clear. They are a relatively new and definitely ambitious fine wine company based out of London with a strong emphasis on wine investment. I was lucky to pop in there recently to try the 1995 Bordeaux first growths.
Susie: Which is the best?
Peter: Lafite. Yeah, it was just so pure and glorious and fantastic. Some of them are looking a little bit tired. Perhaps going through a dumb phase. Um, but anyway, it was glorious. And Margaux second. Anyway, we’re gonna explain a bit more about Oeno’s background in a moment, but you can find out more on their website oenogroup.com or get in touch directly at firstname.lastname@example.org
Susie: And here is a very brief taste of what is to come.
Sid McNamara-Rajeswaran: You can actually get somewhere between 10 to 15% return on investment when everything is sold.
SB: Punchy stuff! Particularly if your bank is paying you kind of 0.0002% interest, like most of them are at the moment
PR: absolutely. But before we dive into all of this, we should, I think, take a moment now, to consider the wider context of wine investment. So we’re talking about a very niche field, aren’t we? Fine wine. Or, you know, so called investment-grade wine is probably, I don’t know, about 1% of the wider market at the very top end. Investment wine is one that has a track record for gaining in value over time. Yeah, and the classic example would be top red Bordeaux, I suppose, which is famous for aging, predictably well over time and has enough volume to be traded as well. So that’s that’s the sort of classic marker.
SB: To be honest, you can argue that the field of proactive wine investment with just the sole or main aim of making money is actually a relatively recent phenomenon. And it’s happened as wine has started moving into the luxury goods territory, with quality and consistency improving and auction houses and merchants getting involved. Even more recently, though, the covid-19 pandemic seems to have been a massive boost. Wine investment has gone crazy as people have piled into fine wine, and that’s been both during and actually continued after lockdown now.
Peter: It’s definitely made it into the headlines. We have certainly seen it quite a lot. What was the one we saw recently? ‘Wine beats Scotch and Hermes handbags as top luxury investment’. From the Guardian. Not sure I said ‘Hermes’ right.
SB: You need to say it more often! Practice.You know, there’s a lovely shop on Bond Street…You just go in and say yes is this I would love…
PR: Anyway, that article was citing data from Knight Frank’s luxury investment index. It sounds like an interesting thing, isn’t it? Which said investment grade wine had risen 13% in value in the year to the end of June 2021, whereas over the same time frame, watches have gone up 5% and cars 4%.
SB: Watches, eh?! Who knew. I hear lego is a popular investment too… Maybe for another podcast. But yeah, the trend is is quite heavily discussed. And there’s evidence for it, frankly, all over, and we’ve got some figures here. The Liv-Ex 100 is an index of top investment wines that goes back to 2001. It closed October 202 on an all time high and the summary read: ‘In its first two decades, the Liv-Ex 100 has increased 272%, survived three global financial crises and returned more than the S&P 500.
PR: Which is a US stock market gauge
SB: Yeah, but in terms of more recent figures, 2021 saw new record set for the fine wine secondary market as it outperformed gold and the FTSE 100, which is the British Share Index.
PR: So there are plenty of reports of how people are not only spending more on fine wine since the pandemic began, but also buying wine primarily for investment purposes. So this is a trend on the up: so called alternative investments seemed to be becoming more popular, probably partly as a hedge against volatile equity markets and historically low interest rates. And I do wonder if there’s not an element of life’s too short, boring investing in boring stuff, or what might be perceived as boring stuff?
SB: Yeah, I’m not sure that it is quite as racy as Cryptocurrencies, though, is it?
PR: No. Maybe that’s too racy for some of us.
SB: The other thing that we’ve been looking at, you often see headlines like the one and we saw recently in the Times Money which read and I quote, ‘I made £500,000 from investing in fine wine’. Yeah, it’s a lot of money to make, isn’t it? And the story was this chap who he started with what could only be described as an admirable calculation that given his wife and he were drinking a bottle of Bordeaux pretty much every day. He needed 350 per year. So in order to drink ten-year-old wine, which he wanted to do, he needed 3500 bottles.
PR: I LOVE that calculation. I mean, that is what I call a proper ten-year plan.That’s proper life planning anyway.
SB: So he started collecting wine and he put £30,000 into Bordeaux en primeur in 1990 I think.
PR: And we should just say, just clarify that en primeur is buying the wine before it’s bottled. You do this for a couple of reasons. Traditionally, the deal was, you’ve got the wine at a good price in return for buying in advance and bankrolling the producer’s next vintage, you know, and in some cases where the wines are made in a really small productions, it could also you get access to the stock before it sells out where it becomes available on the market anyway.
SB: At some stage Chris was asked if he wanted to sell a case back, and he realized he could almost double his money in five years. So this is from his initial investment doubling. And so he started to take a real interest, and he read all the journals or the key journalists. Critics scores, monitored market prices.
PR: It’s pretty easy to do, isn’t it?
SB: That it is, you know, anybody could do anyway. Over Twenty-five years, he has invested more than £4 million and he’s apparently made £500,000. And he also says, which is probably our favorite bit about this whole thing, ‘I have drunk a significant amount along the way.’
PR: That’s the right approach, Didn’t he say something about things not going so well as well?
SB: Yeah, I mean, he admitted that that had happened, and you just need to be prepared for that. You know, he talked about particularly about the market collapse in 2011, after the financial crisis in 2008, and then the market overheating following the 2009 and 2010 vintages, the liv-ex 100 dropped 30%.
PR: Wow, that is big
SB: but he said he didn’t lose out because he said, ‘I hung onto the wine’ and he’s actually started now to to sell it. Just out of interest, so you kind of get a picture of what he’s got: 60% Bordeaux and then 40% Spanish, Italian, Argentinian. And you imagine all red wine?
PR: Yeah, probably. I mean, we wanted to ask the savvy people at Oeno about all this and more, but just by way of preface to their business, it was founded in 2015 with the self stated aim to make the fine wine market accessible to all investors. Um, it’s expanded significantly lately. And it’s attracted a host of, I think, what we can describe as both wine and financial talent into it, Isn’t it from the masters of wine to former city traders. It now has offices in London, Madrid, Bordeaux, Tuscany in New York and apparently plans for Miami soon.
SB: Just to explain, the group comprises three main arms, so you’ve got Oeno Future, which focuses on fine wine investment and advisory services, which is what will mainly concentrating on here. But then also Oeno Trade which sells wines into hospitality: restaurants, bars, clubs, of course, etcetera. And then, Oeno House, a retail business: a fine wine boutique with a private tasting room and al fresco terrace. And that’s in the royal exchange in London, which is where you popped in for the interview, wasn’t it?
PR: It was. And I think there are plans to expand into other locations in due course. Now, the structure of the business is quite important because the various arms are relevant to the investment operation. Now a traditional investment model might be you by the wine, and the merchant helps you to sell it on to someone else. And it keeps getting sold. When the opportunity arise with Oeno Future, when people want to sell, they look to place those wines through trade or, Oeno House. So it’s more of a kind of a modern, a different take on the fine wine merchant than than anything else you know, with a sort of novel funding approach geared to serving various sectors of the market. At the same time as giving private clients a return on their investment.
SB: So, yeah, and I think one of the things to flag up is that they say they specialize in Italy, Spain and the America’s so you can buy them or classic wine investment options through them like Bordeaux, Burgundy, etcetera. But they aren’t just replicating what other, perhaps more traditional wine merchants has always focused on. They are deliberately spreading their net wider, and I think that reflects a wider trend in the wine investment market of increasing diversity beyond the likes of Bordeaux.
PR: Now, they have got ambitious plans to expand all of this business globally. They currently have nearly 3000 clients and the wider group manages about $50 million. They say that their managed accounts ‘yielded our clients and impressive average return of 12.4% per annum in 2020’. So lots of questions to ask! I first to Justin Knock MW, director of wine, and I asked him to give us a bit of context about wine investment.
Justin Knock MW (JK): I think it’s got a very strong British link first and foremost, partly because fine wine investment is something that people undertake over a long period of time. If people are buying wine to collect it and seeking to make a financial return, it’s something that really does take many, many years. We recommend at least five, probably 10.
Also, the UK has a very strong repository of old vintages of wines, and I think wine investment often arose as an accidental outcome of over enthusiastic collectors more than people who really needed to make a financial return out of collecting claret and storing it.
However, it has evolved over time into something that people do make quite good returns on. Over the long term, the classic model would be that tradition that you talk to your merchants and you find what you want to buy. You buy your claret. Let’s call it two cases. You hold it for 10 years because you wouldn’t drink it any younger than that. And by the time you’re ready to drink that first case, both of them have doubled in value.
You could sell one, reinvest the funds in the new vintage, and you get to a point where you’re effectively drinking for free.
That was kind of the basis of it, but it’s become much more complicated than that. Or much more involved in complex.
There’s no doubt that fine wine underpins the entire investment market, and the expectation is that people will make a financial return by buying and holding and seeing a capital gain.
But we also we participate in that part of the market.
Um, the traditional areas would be Bordeaux and then… Bordeaux.
And then in the last 10 years or so, Burgundy and maybe Champagne has become quite active.
And then now Italy in California…
PR: You make a particular point, you have specialism in Italy, Spain and Americas, moving beyond Bordeaux. But Bordeaux is a classic stock that will go up over time. Can you get the same returns from Italy, Spain and America?
JK: You can, I think, you certainly can. In fact, in some places, like Spain, some Italian wines and Burgundy, we’ve seen much better returns recently.
Driven by the usual things that underpin the investment market: supply and demand.
Bordeaux is obviously a very large production area, and because most of the consumers of fine Bordeaux are educated not to drink it when it’s young, it means that the valuations often don’t change for quite some time, and you need to wait until mature vintages start to be consumed and disappear from the market before you see significant appreciation. Whereas some of the fine wine from you know, made in small production so they appreciate quickly, Um, and then even the cult wines from California in Spain, they can be made in literally hundreds of cases or 500 cases.
You know, 1-2-3-4-5 barrels, rather than the hundreds of barrels that producers in Bordeaux are able to produce.
PR: So do you have to have a passion to want to do this? Or you can just be purely for financial reasons? And do the two experiences defer?
JK: From my point of view, it started with a passion.
But the people who invest in wine in our company, many of them are just looking for a financial returns.
So they become aware that wine is often seen as a relatively safe haven, particularly in turbulent periods on global financial markets.
And we’ve seen those in the last two years, the lack of liquidity I was just talking about it can be a great defense for one in that share listed in a public exchange can drop in value by 20-30-40% in a few days or weeks, as we saw in March 2020 last year.
But people aren’t that desperate to sell their 2010 Latour, so you never see it drop by 30 or 40%.
And if you did, the world would pounce on it, and it would quickly go back to where it was before.
So it actually acts as a very safe haven in terms of turbulent times.
But it’s also a very it’s a novel area for people.
I think some people really enjoy investing in wine because it sounds kind of cool.
There’s no doubt that’s bragging rights amongst mates to say, I’ve got cases of cases, Uh, I’ve got I’ve got a full selection of 2017 DRC.
Or I’ve got some You know, that’s quite nice, but people have a lot of different reasons for investing in wine.
PR: So what tips would you have for someone thinking of investing in wine?
JK: The first thing is you have to think about the time horizon and be honest about it because we are sometimes led to believe, or we might think we can get a short term return on it.
And if you do, it’s probably more good luck than than anything.
I think you need to identify that, if you’ve got, um, let’s call it £5-10-15-20,000 as an example to invest, that is money that you need to be willing to not need for at least five years.
The second step is when you do invest in wine, just don’t go for always the top wine from the top vintages from the top regions, because that’s what everybody wants. And those wines are often the slowest to generate returns.
They can generate exceptional long term returns because everybody wants them. Nobody drinks them for consumption do it doesn’t, you know, deplete the supply and the prices don’t change very long.
And if you do need to sell and get your money back quickly, you don’t necessarily get your money back because you’ve got transaction costs.
So the second thing I would say is make sure you diversify and look for more liquid wines to have in your portfolio, and the one area we found works really effectively in this way is champagne, and people don’t think champagne is an investable wine.
But surprisingly, in the last 12 months, grand marque champagne has gone out of control after lockdown and the pandemic.
People cannot get enough of it. People have found a reason to celebrate. Perhaps just being alive is one good enough! It’s been very, very high demand.
But the thing is, if you’ve got the grand maque like Krug or Dom Perignon or Comtes de Champagne, every restaurant in the world will want it on their list, we can sell that quickly. It’s got very, very high liquidity.
So it’s a lovely wine or sort of wines to have in your portfolio to give you. Let’s say you need a little bit of your portfolio back in the next year. Have some champagne.
PR: A lovely idea. And aside from Burgundy, you know, champagne. Are there any other other regions or producers that you see as being sort of really up and coming stars of the future? That might be sort of good to invest in now?
PR: Um, there are two approaches to this question. One is, I think the classic regions are always going to be in demand.
Okay, we know that the brands of Champagne, Burgundy are super strong, and all one collectors in the world want them.
However, within those regions there are definitely people who have peaked at the top. There are rising stars.
So in places like Burgundy, it’s an ongoing quest to find the new producer, the next generation.
Someone who’s wines are so expensive. But they’ve got access to great inherited parcels, So that’s more really like continuing to find the gold amongst all the soil in the in the top places.
And then beyond that, there’s still so much to do in places like Italy, Barolo is definitely having a run.
Tuscany is the Bordeaux of Italy, and they’re both driven the reputation of Italy, and it’s been very exciting and then the last three or four years.
But there’s tons more to discover there as well, and I think we’ll find things with old vines in other parts of the world.
You know, people are starting to really value some of their old vine treasures in places like Spain and Australia, in California, and some of those, uh, can be under under under appreciated.
PR: A difficult question for you. Do wine investments ruin the game for normal wine lovers? There was a time before wine investment, and now the top wines have risen to stratospheric prices, and it means that they are largely unaffordable for for everyday wine lovers. Can you blame wine investment for that?
JK: Maybe. It’s a very good question. It’s hard to know what’s the cart and what’s the horse.
You know, those wines were already going up in value because the quality has improved a lot in those top wines.
You know, we’re in the golden era for one production in the last 20 or 30 years, and the top estates maybe weren’t so investible in the seventies and eighties because their quality was so variable from year to year.
But by virtue of having a run of vintages in the eighties and nineties, being able to reinvest profits into viticulture, winemaking, all the best expertise, they’re now making regularly great wines, even in challenging years.
Which unfortunately then starts to meet the definition of good investments to people who are not wine drinkers, they’re looking for something that has pricing power, that is reliable, that increases the value of real estate and all those sorts of things.
So wine investment is the outcome of a series of people identifying the opportunities for wine in general.
PR: Okay. What’s the future of wine investment?
JK: That’s a good question. I think we’ll start to see… You pointed out very good thing is that the top wines are becoming more and more difficult for people to try.
Um, I think there’ll be more experiential type investment things where people buying collections or large format or verticals and you’ll be able to put on rather than people saying, I want to buy a bottle of old Bordeaux and drink it, Um and let’s say let’s say that cost you £1000.
Uh, Instead, investors could buy an entire collection of vertical and put on a great event and sell tickets for £1000.
But you’ve got to go and try 10 or 15 or 20 images of those wines, right, And this is something that ties in very neatly to the modern world of: We don’t want things as much as we want things to do so.
That’s an area of interest. And that’s one of the reasons why we are trying to build lovely collections, because then you can point the word you and say, Okay, let’s do a whole vertical of the Il Pergola Torta, many of them large format, and we put on the tasting for 100 people, and that allows you to bring in the winemaker and do some sort of food event around it.
And you create some luxury packaging, sell the whole experience.
So we are already starting to line that up, we are looking at doing some events from next year onwards that will allow us to start. Collectors will buy the wine, but we allow them to be liquidated by putting the wine out through these these types of events.
PR: Or you can do an NFT for that experience.
JK: I’m familiar with the term, but I’m not really sure how to not up to date with those.
PR: So maybe in the future we’ll see Oeno NFTS! But we’ll see – at the moment, it’s mainly sticking with the wine. Justin, thank you very much indeed.
JK: It’s a pleasure. Thank you.
SB: Yeah, I’m not sure. I’m particularly know about NFTs either…
PR: Me neither! I think I was was trying to be clever.
I don’t think this is the time or the place to go into, NFTs, which are non-fungible tokens, of course. Um, sort of like digital collectibles Might be one way of saying it, but they are starting to crop up in wine, arne’t they?
SB: Yeah, one for a different program. But it was fascinating to hear Justin’s thoughts about investing in experiences wasn’t rather than cases of wine.
PR: You know, absolutely. It’s a new angle, but I don’t know, I could see it being quite successful. What do you think?
SB: Absolutely everybody wants experiences these days.
PR: The good thing about investment in experiences is that it focuses on the wines actually getting drunk and enjoyed rather than just being sold on and on and just never getting tasted.
SB: Maybe one for the next birthday present list.
PR: These are expensive podcasts! It’s all adding up, isn’t it?
SB: Anyway, you also sat down with one of the portfolio managers from Oeno, didn’t you?
PR: Yeah, absolutely. So Sid McNamara-Rajeswaran is chief portfolio manager at Oeno Future.
He deals directly with private clients, and he’s got more of a financial background. So I wanted to get his take on everything by way of a different perspective.
For this interview, we’ve moved into a room that wasn’t so soundproofed. So please bear with the Bells chiming and the phones and the merry people clearly having a good time in the background.
SB: were they having a good time?
PR: Yes! Like we were having a good time, just in a slightly different way.
Anyway, I started by asking said how he enables his clients to benefit from the fine wine market wine
Sid McNamara-Rajeswaran (SMR): The fine wine market has been an opportunity to create wealth for individuals since Roman times.
I think one of the key things to this – and you will know that’s better than most – is that wine gets better with age, and people are taking advantage of that opportunity to say Okay, it’s worth X right now. 10, 15 years down the line, it will be X plus for those who are looking for an alternative asset.
Those who are looking for something a little bit more safe haven to use a buzzword and not as risky as digital currencies or putting into the stock market.
Right now, the market offers them an ability to actually invest in an asset class that is going to get better with age and importantly, it’s a consumable asset, so less and less of it will exist over time.
And our job is to source the wines that we believe we’re gonna help them in that right or that aspect. And then ultimately provide those exit models for them, the exit platforms and our key exit platform is consumption.
Okay, we’re not trying to sell these wines onto another private clients, and they never be seen ever again.
We have Oeno Trade set up to deal with hospitality clients. And we have Oeno House to sell wine through retail director consumers.
PR: If people are looking just to invest, what kind of return can they expect?
I mean, you say on the website is an estimated 10% return for private investors.
How can you be so sure markets go up? In 2011 the fine wine market went through the floor. So what’s your contingency plan? I guess, for that kind of thing happening.
SMR: So one of the key things we as a company, especially in the investments side, again it goes to leaning on to the team and leaning on their expertise is to make sure that we understand exactly from an investment strategy point of view, what the client actually wants.
Yeah, there are some people who are looking at this from a super long-term perspective.
You know, I’m going to lay down some wine so that my Children could benefit or the grandchildren benefit from.
There are some people who say, You know, I can’t really see myself investing longer than three years, so what we’re able to do is match those people with the right wines
Now, obviously, a lot of wines have multi-decade ageing capabilities, but some of them might take a little bit longer to get to their prime spot.
Some of them are closer to the prime spot, so we try to make sure that we match that together with what the client actually wants, so that when you look at it as an average, you do get to that 10%.
Um, I would argue, actually, you know, as long as the client really explains to us what they’re looking for, you can actually get somewhere between 10 to 15% return on investment when everything is so so when you look at it and go, Okay, How did my investment do you look at the average over a number of years that you’ve invested in and you can average between 10 to 15% per annum.
Um, having said that, though, there are some opportunities where some wines are exceptional.
Um, so I mean, a client of mine came on board in February this year.
Oeno House opened July this year because of the retail aspect of the sale, because we’re able to actually priced at retail price between that very short period of time.
Between February and July, my client, got just shy of 10% growth on a case of 2010 Pavie: great vintage great wine in prime drinking age, Oeno House wanted it: perfect.
So he was very happy to receive that and sort of used the funds to go again.
PR: That’s very short term.
SMR: And I will never tell anyone that anything could happen that short term.
But with our unique way of selling into consumption, there are opportunities for clients to be shown that capability in the near term just to say, Well, this one is in demand.
PR: Yeah, just to be clear about these exit strategies, you can sell into restaurants or you can sell to people in the shop here.
PR: Okay, is there are some a minimum some people should look to invest?
SMR: For us, there is: we ask for a minimum of £5000.
And the reason for that is diversity.
I’m never going to put it into one case of wine. And you can spend £5000 on a case of wine!
But that over leverages you in one wine producer, one region all your eggs in one basket.
What we like to do is build a balanced portfolio, different vineyards, different regions, different wines within those those regions as well, so that you get to benefit from the spread of the great wines that are created around the world.
PR: What are the costs involved?
Because sometimes we talk about why investment we say Yes, 10% growth, and that’s great.
We all like to focus on the good things. But what costs and people typically expect, because usually there are things like storage charges, insurance costs, potentially management fees in some instances and also commission on sales.
SMR: We are very, very, very clear.
So there are no management fees.
Uh, and when I say management fees, those are the storage costs.Those are the insurance cost.
Um, so we store everything with London City Bond Vinotek facility.
We get huge economy because we’ve got quite a lot of wines are out there at the moment, so there’s no point passing on those costs to our clients.
We want them to have the most seamless, uh, and painless process.
So insurance and the storage are covered by us.
PR: So just you don’t charge any storage fees at all?! Everyone charges storage fees.
SMR: We suck up the storage for our clients.
The only thing we will charge is 10% on a profit when they sell their wives. Not on the wholesale, not on the original sale, just in the profit aspect.
So what it means for us is that we are then incentivized to make sure that we get our clients in the best possible price and find the best possible price exit because it’s a partnership, you know, we we benefit from them benefiting.
So it really is a I do genuinely believe it, it’s one of the fairest ways of offering the opportunity to any investor who’s looking to find a market.
It shows that we’re not incentivized on the front end for us, the incentives are on the back end.
PR: Well, I mean, but if I say buy a case of Lafite with you that I have every intention of storing for 30 years before I sell it, that’s all fine?
SMR: That’s fine.
PR: There’s no storage cost?
SMR: No storage cost.
By that point, that will be over 30 years would have gone up quite substantially, and so 10% then we would actually come into into a logical center who actually work in both of our favours.
PR: But in the meantime, you’re paying quite a lot of storage fees?
SMR: It’s negligible.
PR: Oh, okay, Alright, interesting. What about tax implications now?
Obviously this varies around the world, and it varies from person to person.
But generally speaking, it’s often said that there’s no capital gains tax to be paid on wine because it can be seen or can be classed as a ‘wasting asset’.
As far as I understand that actually is set at 50 years in the UK and it can be argued that a lot of fine wines are have a shelf life significantly longer than that, so they don’t necessarily qualify.
What do you advise people about tax?
SMR: Well on the front and everything we do with is VAT and duty free.
PR: Because it’s in bond.
I always say to my clients that the rule of thumb is don’t hold it for longer than fifty-years.
Now, when you do that, yes, If you’re if you’re holding onto a d’Yquem and actually if you’re still holding on to an 1811 d’Yquem, you can still drink it.
But if you’re holding onto it for less than 50 years, and the rule of thumb is that you don’t have to pay capital gains on that.
However, if you want to hold on for longer, then inevitably, you’re actually going to come into inheritance case or inheritance tax.
So on that front, obviously, then any IHT lawyer can advise you the best way you could make a CGT as well as well as that when the Children actually sell it.
PR: But I would like to think if I’ve got 50 years in me that I would I would like to sell it.
But what are you saying: that if you sell a first growth at forty-five years, even if it has potentially 100+ years shelf life, you can still class that as a wasting as well?
PR: Okay. What about any other sort of potential downsides of wine investment you would want people to be aware of?
SMR: As far as the first one goes, the first and most important, it’s really researching the company to work with.
In any investment it matters who you are working with. You need to do huge amounts of due diligence.
I think with wine one of the things that has popped up in the past eight is ownership.
So there have been stories in the past where people have invested through companies, and when that company has gone under or names were changed, or whatever it might be, they suddenly find out that they don’t actually own the wine.
Now, with us, like I mentioned, all our clients signed a contract.
That personal contract gives them full title, so they are the only person who owns each and every bottle of wine is in their portfolio, no matter what happens to the company.
The other thing about investment again it goes back to what I mentioned before is is making sure that the wine has been placed in your portfolio matches exactly what you want from an investment strategy.
Let’s go Lafite: the 2020 great vintage great wine.
You’re not gonna be able to sell that really into consumption for at least eight years, if not longer.
I would never place that into a portfolio for someone who said to me, he said, I really want to only tie up this capital for 3 to 5 years.
Because I can’t comfortably sell that for the maximum profit in that time.
So it’s just making sure that you are listening to as an investor that what you want out the investment or what you want, you want your capital to do has been listening to and then with us.
Obviously, we sit down with some of the brightest minds in the world of wine to devise portfolios that much exactly what the client wants.
PR: Now, fraud and fakes are a big issue in the world of fine wine.
What do you do it, you know, to to fight fraud. You know, you say you confirm the authenticity of everybody that passes through your hands.That’s quite hard to do.
SMR: It can be very hard.
I mean, you’ve got a dedicated department that look at everything that is of old vintage.
Let’s be honest, an older vintage of wine, you know it is something that potentially could be fraudulently made.
So there are various techniques that dedicated group will actually inspect all those bottles.
Now, when it comes to the wider influx of wines that we bring into Oeno, we try to work as far as possible, where possible, directly with the vineyard so from doing that, you know, if you can’t trust them, who could you trust?!
But, you know, by doing that, we we cut out the potential of the middle man.
I believe it was towards the end of last year where Italian police, it could have been this year, actually.
But Italian police found a counterfeit Sassicaia ring.
Two things. One: horrible. Because obviously, a lot of people got caught out by this. We certainly would never be purchasing through anyone we didn’t recognize. So on that front, we weren’t affected by it.
Secondly, and this is very weird by-product of it. All of a sudden, the market realized there’s actually a lot less bottles of Sassicaia in existence than they were before.
Which meant that there was a bit of a jump in the price as well.
So I’m not saying fraud is good, but if you are utilizing the correct people or you’re utilizing correct companies and the provenance of what you’re holding is precise, those sorts of bad experiences or stories could actually end up benefitting you in a very weird round about way.
PR: What very brief pieces of advice would you give someone looking to invest in wine?
SMR: research, research, research, research.
Research companies that are out there, research to people that can offer you the ability to enter into the market.
So essentially, what you’re looking for is a company understands you, can understand exactly what you want from your capital, and ultimately through huge amounts of due diligence someone you can trust.
Okay, That’s always gonna be a key thing with any investment.
Certainly with wine is that trust, Because with that trust, you ultimately can build a strong relationship with the person who is trying to help your capital grow.
PR: Sid, thank you very much indeed.
SMR: Thank you.
SB: No storage! Now that is something. That’s a game changer.
PR: Isn’t that interesting?
Um, but just to say, on the subject of costs and tax, particularly, uh, off the back of the interview, we should We should add that everyone should do their own due diligence on that.
It’s essential to check before diving in.
SB: Ask the question.
PR: Absolutely. This can be very personal.So you need to weight up all the different factors involved.
So, by way of summary, what would our top tips be when it comes to wine investment?
PR: Okay, so to kick off, I think the key, the most important thing is to find the best, the right merchant, the right company to work with for you.
PR: Make sure you trust them. Do you feel comfortable that they’re reputable?
And do check all charges or costs in advance. You know, including what we’re saying that well, your charges if they apply, Yeah, Selling commission, really important, insurance, any other management fees?
What are all the all the costs exactly?
And the exit strategy is particularly important. It’s one thing buying it, you need to be able to sell it. How does that process work?
SB: Well, I would say Don’t be impatient.
So you really need to allow a minimum of five years to see a proper return on investment.
And while you’re doing that, take an interest, you’ll get so much more out of it.
The idea is that it should be fun, you know, research the market, do that and listen to a podcast.
PR: There we go! You got that little plug in there.
But you know, I was following on from that by saying: double up, double up on your investment.
So maybe don’t just buy one case buy two cases, and maybe you can sell one and drink the other.
I don’t know. Um I think it’s so much more rewarding when you get into this, isn’t it?
Um, and it really helps with the next bit of advice, which is, you know, take the rough with the smooth, good and bad things happen.
They’re doing all investments, don’t have anything in really interesting is gonna have ups and downs.
Totally so, you know, hopefully we have more of the former than the latter.
You know, it’s not all plain sailing, but I think you know, to maximize the upside, getting involved actually enables you to reap the benefits even more.
You know, you’ve got to see it as a bigger piece and not just financial gain.
And that way you’ll get much more out of it.
If you take an interest, live the lifestyle and enjoy it for stuff beyond the financial game, I think it becomes something much more magical.
SB: So if you’d like to get in touch with Oeno, then please do via email: email@example.com
Or you can find out more via their website: oenogroup.com.
That’s all we have time for.
Thanks to Justin Knock and Sid McNamara-Rajeswaran – and thanks to you for listening.