Fine wine investing with Vinovest

One of the things I find interesting is looking out for innovative and alternative investment opportunities, partly because traditional investments sound boring (though important) to me, and partly because these alternative investments tend to be less correlated to the overall stock market. Let’s explore the fine wine market today.

The power of technology bridging alternative investments

Technology and the concept of fractional ownership has really evolved so much over the years, that it’s been honestly really amazing the kind of instruments that retail investors like you and I can now be exposed to.

Previously, retail investors would not be privy to investment vehicles like property (I’m talking about investment property here), blue-chip art investment with artists like Andy Warhol and Claude Monet. But now, platforms like Partbnb and Masterworks allows you to do just that, at a fraction of what it would cost investors just 5 years ago. You may not own an entire piece of Monet, sure, but you can participate in the appreciation of these assets in a way that was unavailable to you before.

Fine wine market

First of all, why invest in fine wines? I’ll have to say, the key in a robust investment strategy, is to be properly diversified. I’m not going to tell you how much to allocate to different types of investments, simply because that is a very personal choice combining your experience level, risk appetite and unique financial positions.

What I can say though, is that to have a proper defensive portfolio, we should look at investments that are uncorrelated to your other investments. For instance, Gold is traditionally uncorrelated to the equities market, and so some exposure to gold is a good defense against mitigating equity market crashes.

Looking at the Live-ex Fine Wine 1000 index in this report then, we can see that during the covid pandemic stretching Jan to Mar 2020, while the S&P 500 fell by more than 23%, the wine index held strong, and dropped by only 4%. They also have a pretty impressive annualised return of 7.6% over the last 10 years!

Climate change and synthetic wine production could push scarcity of fine wines

We can all already start to see the effects of climate change, and that definitely impacts the yield and quality of each year’s wine harvest. If conditions become harsher, quality wines will be harder to come by, and its corresponding value will likely surge over the years.

I also wrote about Endless West, a company that’s replicating the taste of wine and other alcoholic drinks using molecular flavours, with no grapes involved. While these may scale in popularity, it almost makes authentic wines even more valuable. Just think about it. Has art replicas made the original artwork any less valuable? I would argue that the more replicas there are out there, the more awareness there is for the original artist, and the more valuable it makes the original piece.

Cult Wines

Cult wines, in which the wines are collected more for investment purposes than for consumption, have provided for a booming secondary market. Wineries like Screaming Eagle in Napa Valley and Penfolds Grange in Australia have reached those cult status, and many wine enthusiasts are willing to pay a premium to collect these wine.

What is Vinovest?

Vinovest is a platform for retail investors to be able to access and invest into the fine wine market. You will have access to a team of industry experts and sommeliers who will appraise the wine and carefully select the ones with the best appreciation potential and invest for you at the best possible prices.

They then provide the entire package of services, including procuring the wine, transporting and storing it for safekeeping. When you are ready to sell, they will help you find a buyer and manage the entire process.

Investment starts at US$1,000, and for US$50,000 and above, you’ll get personalised guidance from experts, and invitations to exclusive tasting events and access to rare, auctions-only wines. Vinovest charges a 2.85% flat fee annually to help manage everything.

The wines are fully insured, so if anything happens to the storage facility,, or to Vinovest, you’ll still get paid out.

With Vinovest, you own the wines you buy

Bear in mind this is not a derivative product. You actually own the wines you see on your dashboard. You can even choose to consume them if you wish. But that’s not really what you’re here for, is it?

Why don’t I purchase and store the wine myself?

Sure. But do you have access to good prices as an individual buyer? Do you know how to properly store wine for years, if necessary? Do you really want to go through the hassle of getting insurance, transport and all of that plus storage options?

I didn’t think so.

What wines will you get, investing with Vinovest?

I was curious as to what their onboarding process was, so I signed up to find out. Signing up was a fairly easy process of email and password. Once in, they asked about risk tolerance to split each investor into conservative, moderate and aggressive portfolio styles.

I obviously went for the aggressive portfolio.

Here’s where it gets interesting. Based on your funding amount ($1,000 | $5,000 | $10,000 | $20,000 | $50,000 | $100,000), you were given a list of wines you should buy. This also changes with the risk tolerance scale that you can toggle.

With US$1,000 and an aggressive stance, my recommended choices were the above: Taittinger, Comtes Champagne 2006 and Guigal, Cote Rotie Ampuis 2015.

US$70.83 per bottle works out to be SGD99.30. Let’s call it an even $100. I googled for the exact same champage on sale on the market today, and it was $127 before taxes.

So immediately we’re looking at a 27% profit margin if I were to just buy and sell without holding? I believe there are some taxes to be paid that is not reflected on the Vinovest platform, but I doubt it will amount to that much.

I then went to look at the $50,000 investment recommendations, and this was what came back.

Boom! Penfolds! Cult wine!

So let’s see. US$325 comes up to SGD$455. When I research it on wine-searcher, prices ranged from SGD$498 per bottle for a case of 6, all the way to S$940 per bottle!

Plus, if you have the box, you can sell it for $874 per bottle!

So, at the very least, it does seem like Vinovest is legit in their claims of getting good prices for fine wines. And to be honest, US$1,000 doesn’t seem too steep to be investing in something that’s interesting, and can be seen as a hedge against the traditional money markets.

What’s the worst that can happen? Nobody wants to buy the wine off you, and you drink it all. After all, Mark Cuban has said he’d rather invest in bananas than bitcoin, cos he can eat the bananas.

PS: This is not investment advice, nor a paid editorial. Please do your own due diligence.