Fine wines are a relatively new investment idea, but their bubbly returns have caught the fancy of the affluent across the world. In fact, the premier wines of the world — Chateau Lafite Rothschild, Margaux and Haut Brion — are even sought after by the large financial institutions.

Returns from wine investments have become difficult to ignore, which is what makes this alternative avenue so enticing.

With finite supply determined by law, fine wines have helped deliver mouth-watering returns.

The Chateau Petrus 2000 increased by 100 per cent in value within four years. From a market value of €25,000 in 2009, it now fetches over €50,000.

The Chateau Lafite has seen its value vault 280 per cent over 25 years.

Even if these are unusually fancied wines, a fine wine investment portfolio can fetch double-digit returns.

But a wine portfolio, like stocks, must be tailored to the needs of the investor.

Fine wine investments also need time to mature, with a medium-to-long term investment recommended, starting at the three-year mark.

The basics If you are keen to begin investing, you should know that most wines may be good to glug, but only a few are deemed investment-worthy. Many of the world’s premier wines are produced in the Bordeaux region of France; nevertheless, there are other wines and other alcoholic beverages which offer investment value – Burgundies and Champagne for instance.

The appellations in France (administrative regions) strictly govern and regulate wine production to ensure the highest quality and manufacturing standards.

Their guidelines determine the annual production and even the specific techniques and methods involved in the fine wine production. The wine ranking system (the Bordeaux classification of 1855) is a strong indicator of the value of a fine wine.

Exclusive wines are rare in number and limited in supply, and rising demand over time makes existing stocks appreciate significantly in capital value.

Fine wine profits are free of tax, although tax regulations may differ depending on location.

In addition, fine wine helps you possess a valuable tangible asset. Brokers who offer fine wine investing options take care of everything from procurement to transport to temperature-controlled storage. The assets come with certifications of authenticity and verified provenance.

Authenticity of valuable stocks is obviously of great concern to the wine buyer. With fake stocks proliferating, you are strongly advised to carefully verify that the cases and bottles and sometimes even the contents thereof are 100 per cent genuine. Authentic fine wines come with certificates from the actual chateau , and every change in ownership and location can be tracked.

Preserving value The provenance, as this is known, is a crucial factor deciding investment value. Recent measures taken to battle counterfeits in the market include the prooftag system, already adopted by Chateau Lafite Rothschild and Chateau Latour. This involves a physical lock on the bottle ensuring the stock is authentic and un-tampered with. Storage and transportation of fine wine are vital.

A case of wine frequently shipped all around the world, subjected to fluctuations in air pressure, temperature, humidity and other factors will most likely not be in perfect condition; labels are stained, corks are frayed and then, market value drops.

Professional handling and temperature-controlled storage facilities designed to hold such stocks are an absolute must.

The financial potential of this market is demonstrated by the fine wine indices listed on Bloomberg, as well as the rapid growth of the global wine trade. Electronic platforms like Liv-Ex track much of the global fine wine market, and if projections stay true, the future looks very promising.

For fine wines are not just heavenly to drink; the heady returns may make for a refreshing aftertaste.

The writer is the CEO of Bordeaux Traders. The views are personal.

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