Fine wine investments have a proven track record of realising good returns for the diligent investor. However, without some good knowledge of wines, or at least the time to carry out some in depth research, the fine wine market can be a bit of a jungle. There are literally thousands of different wines; different countries, different grapes, different styles and different vintages. If you are attracted to the promise of good returns but don’t have the necessary expertise, a wine investment fund may be the solution for you.
Finding good wines that will appreciate in the future, at a good price, is a difficult business that can seem out of reach to all but the most knowledgeable and well connected. Investing in a wine fund can help to resolve these problems, but it will cost you. Bear in mind the cost of buying your first wines to build your portfolio, storage costs, annual management charges, commissions and profit participations. Remember, these costs may significantly reduce the net return on your investment.
Let’s look at ‘The Wine Investment Fund’ for example. This is a fund that uses the in-depth industry knowledge of the proprietors to make investments in selected fine wines. There is a fixed term investment period of 5 years with a minimum investment to private investors of £10K (although the average investment is circa £20K). The Wine Investment fund will charge you a 5% subscription fee, an annual 1.5% management fee, and a performance fee of 20% at maturity. Yet despite these seemingly extortionate fees The Wine Investment Fund reports consistently good returns. Their last published figures (2009) show an annualised return of 23.4% (after deduction of fees but before deduction of performance fee).
If the thought of all those fees puts you off, maybe you should consider a syndicate. A syndicate is simply a collection of investors who build a collective portfolio, benefiting from the economies of scale and sharing fees and charges. One of the greatest benefits of a syndicate is that you retain control and ownership of the wine, a key difference between syndicates and funds.
Bordeaux Cellars run a syndicate scheme, providing all the services of a fund, but on a simpler legal footing. As a member of a syndicate you will be a Limited Partner. Fees can be a bit hefty, but at fixed amounts (a set up charge of £1000, an annual management charge of £500 and a dissolution accounting charge of £1000) they are of interest if you invest a significant sum.
If you don’t have the knowledge to make your own investments, but shy away from wine investment funds, a syndicate could be the answer for you.