Shanghai Daily -- Cellaring a decent investment
TO the hardcore wine nut, cost is hardly a factor when it comes to savoring their favorite drops. Connoisseurs are known to plonk down vast sums in securing the latest releases or hunting down gems from the past.
Entire caverns are built to house these collections, and for many, coming into possession of a case of a top first growth or coveted Burgundy becomes their raison d'etre.
Sensibly, it would seem, there are elements of the free market that capitalize on this behavior. The science of wine making has developed exponentially and quality has risen with it - ideal conditions to send prices soaring sky high. The ageability of the beverage is also a factor in its long-term value.
Investing in wine thus becomes a lucrative venture. If the top vintages are so hard to come by, paying a third party to secure them for you is an investment that ultimately pays for itself.
One such company that specializes in this trade is Chateaux Management Group. Founded in 1998, the firm collects and invests in wine and represents clients in Europe, Japan, Hong Kong and Beijing.
Clients have the option of having the group manage private wine investment portfolios or to buy into a vintage wine investment fund. The former involves a bespoke private wine collection service with investments of at least US$500,000. These are done according to customer tastes, and the wines selected are done so based on their potential for appreciation.
Not all wines are meant to age, however, and as technology and research and development take greater prominence, the leading producers are pulling away from the pack. "Basically there is a core group of about 10 products," said Corinne Bonne, director and investment manager of the group. "Besides the Bordeaux first-growths and super-seconds and top Burgundy, we also invest in the Cote du Rhone and in Champagne."
The other aspect of the group's business is in investment funds. Clients can sink a minimum of 50,000 euros (US$77,400) into shares in an offshore fund created on the Cayman Islands. The money will be used to buy at reputable auctions and also sourced from other dealers - Bonne attends en primeur but does not buy there.
The purchased wine is then stored in London, where it is audited every year by reputable firm Ernst and Young and independently evaluated by experts each year. After a term of five years, clients are invited to collect their wines, allocated according to the number of shares they have in the fund, or to sell either a portion or the entire lot.
According to Director Bonne, there are about 20 such clients on the Chinese mainland.
Local distributors ASC Fine Wines is also involved in wine investment for the local market. The ASC model, however, focuses on the en primeur model.
As a merchant, the country's leading wine distributor is able to handle a large amount of inventory and has already established relationships with various brokers.
The Bordeaux market operates through negocients, a system of merchants who buy from the chateau and release their stock as they see fit. In essence, in order to obtain 40 cases of a first growth, a distributor has to deal with as many as 10 different merchants.
According to ASC's in-house sommelier and Wine Residence General Manager Andy Tan, the company has the assets to pay cash up front, thus the firm does not need to hedge their bets against currency as well. Private investors are then invited to purchase these top drops at a rate decided upon by ASC.
Unlike Tan's previous experience running such operations in his native Singapore, local investors are looking for the financial benefits of investment as opposed to securing the wine for future enjoyment. "We see more investors than real consumers. Many people ask about period of returns, and who to resell to. So we see a different market which we are trying to integrate, so it's a win-win situation."
