One of the main draws for many over the years has been the low correlation to equity markets.

 

The spread of Covid-19 is gripping the World, Europe has now become the epicentre, markets have been reeling, casualties are building up.  Although the priority will always be one’s health and the health of our loved ones, the financial implications of this pandemic are very real.

We have been introducing clients into the fine wine investment market for well over a decade and one of the main draws for many over the years has been the low correlation to equity markets. The chart below is a great example of just how fine wine can offer stability to any investment portfolio; it’s also why we are seeing a large amount of interest as investors look for a safe haven.

Cult & Boutique Wine Management

The main reason for this low correlation is the supply and demand nature of fine wine. Even before the effects of Covid-19 started to hit the financial markets wine had been ambling due to tariffs imposed by the Trump administration. Yet no signs of panic selling have been evident and that trend has continued as we’ve moved into uncharted territory. In fact, it’s been quite the opposite with seasoned investors looking to strengthen their positions.

 

It’s widely acknowledged that diversification is vital in any investment portfolio

 

Our ‘4 portfolio’ assemblage takes into account buyers’ tastes, appetite to risk, desired hold terms and budget levels, allowing new speculators to enter the market with confidence knowing the products have been selected around specific requirements. This offer was put on hold last week due to a spike in interest from our existing client base, so it’s my pleasure to announce that we are now asking for anyone who has an interest to submit details via our website here.

These are unprecedented times, yet if we look back at the historical performance of fine wine, when markets are in free fall the results have been strong. In 2011 with the backing of the Chinese government the most successful wine fund in history was launched. Aiming to yield 15% over five years, The Dinghong fund raised closer to 125% across the 5-year period. It’s widely acknowledged that diversification is vital in any investment portfolio and we see fine wine playing an important role for many in the years ahead.

 

By Enzo Giannotta