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2021 was a good year for Fine Wine. The market gained 19.08%* and posted positive returns each month. This strong performance led some investors to fear that momentum would wane in 2022.
However, these concerns have proven unfounded and the market is demonstrating the resilience to macro-economic factors that attracts many of its proponents as an investment asset.
As of the end of Q1 2022, excluding commodities, the Fine Wine market has outperformed most major markets, including the FTSE100 and Dow Jones. Burgundy and Champagne continue to shine, with Louis Roederer, Cristal 2008 topping the trading charts by value.
The unique situation within which global markets have operated since the pandemic struck in 2020 makes predicting how any asset class will perform difficult. But, as we head towards the end of Q2 2022 and the mood across almost every global market is dark, Fine Wine has remained relatively immune with continued solid performance.
Wine’s position as both a diminishing asset, and one where capital appreciation comes over a long period of time as bottles age to maturity, means that price volatility is very low. The resulting resistance to macro-economic fluctuations, gives Fine Wine a serious advantage over both mainstream financial products and most other alternative investment asset classes.
The question many investors are now asking is where the opportunities lie for the remainder of 2022, what are the upcoming wine investment trends and which are the best wines to buy for investment.
When deciding which wines to invest in, you’ll want to consider both your own goals for returns and the way each region’s unique offerings could help you achieve those.
Whether you’re drawn to legendary Old World wines from areas like Bordeaux and Burgundy, or the rising stars of the New World coming out of territories like the Maipo Valley in Chile or South Africa’s emerging wine region, Elim, there’s an option that will meet your personal criteria for risk and reward.
To help you decide, we’ve provided key details, and noted a few of our top wine investment picks for each region below:
Market mainstay
Bordeaux has long held the largest proportion of the global wine market – 40% trade share by value in 20212
Liquidity
As part of the largest global wine market, Bordeaux is easy to buy, sell, and trade
Stable
Bordeaux has the lowest annualised standard deviation of monthly returns at 3.77%2
Scarcity
Difficult growing conditions 2021 have led to below-average volumes of production – this year’s bottles could become especially valuable.
Solid long-term performance; sky-high recent returns
Overall, the Burgundy 150 index experienced a CAGR of 13.1% from 2016 – 2021.3 Top performing region so far in 2022 with a 22.3% jump as of 31 May.
Incredible returns at the top
Cult Wine Investment’s Iconic Burgundy producers saw returns of 36.8% in 2021, and Tier 1 saw 19.9%..3
Great potential
Cult Wine Investment’s Tier 2 and Up-and-coming Burgundy saw returns of 3.8% and 7.9% respectively in 2021,3 but there may be high performers in these categories in 2022.
Steady growth
Champagne’s trade share value grew to around 10% recently – up from 2% in the early 2010s.4
Consistent demand
Since Q2 2018, Champagne has held 7.5-10% of the global fine wine market by value.4
A luxury institution
Champagne is known as the best of the best, not just in the wine market, but luxury and fashion at large. Top producers are household names, and have dedicated followings all over the world.
Stable market
Liv-ex’s Champagne 50 saw annualised volatility rates of 5.3% from 2016 to 2021 – alongside annualised returns of 10.9%.4
Low volatility
Rhone’s monthly values showed a standard deviation of 3.19% from September 2020 to September 2021 – lower than that of Champagne (4.59%) or Burgundy (8.19%).5
Relative value growth
When comparing Rhone Syrahs to Australian Syrahs of similar scores, the Rhones present a significantly more cost-effective opportunity.
Long-term potential
Rhones’ stability and consistent returns make them an attractive option for long-term investment.
Sustained demand increases
Exempt from a tariff imposed on some European wines, Italian fine wine became very popular in the US in 2020. The surge held steady after the tariff was suspended in March 2021, and Italian wine claimed a 15.4% average monthly trade share in November 2021.6
Growth potential
Increasing global recognition and a reputation for quality have made Italian wine a popular way to diversify. Cult Wines’ Italy selections provided 63.4% returns over the past 5 years,6 and there’s still opportunity for growth.
Great relative value
Compared to traditional European wines of similar quality, wines from regions like California, Chile, and Argentina can offer great relative value – and potential for returns
Incredible growth
The Rest of World (Australia, Spain, Portugal) trade share grew from less than 1% to 5.9% from 2010 to 2020 and demand continues to increase7
Strong 2021 performance
Fine wines, according to the Liv-ex 1000 index, gained 19.08% in 2021. Despite the difficult economic backdrop in 2022, the upward trend remains in place and is likely to continue.
Solid hedge against inflation
The returns on fine wine have outperformed inflation rates since 2006, and this gap is only widening.
Increasing demand, decreasing supply
Many French producers have already seen the effects of climate change, and produced lower volumes than in previous years. This scarcity is likely to continue – and drive even greater demand.
When asking yourself what is the best wine to invest in, there are several criteria to take into account.
Your budget: Consider your needs and choose the bottles with the greatest potential for the returns you want
Storage & cellaring: How will you store your wine over the long term? Proper wine storage and location influence quality and hence value and ease of sale. At Cult Wines, we store all wine in our own state-of-the-art London City Bond warehouse, which is one of the biggest wine hubs in the world.
Producer renown: Bottles from well-regarded producers with proven track records of quality vintages are always in demand. With dedicated audiences, these wines are generally easier to sell on – and for greater returns.
A global outlook: Diversify with a mix of established regions, like Bordeaux or Burgundy, and emerging areas, like Italy or Argentina. Choose an array of styles and varietals for a well-rounded portfolio that’ll see different benefits both long- and short-term.
The best investment bottles for 2022 can be yours when you register for CultX. Source bottles from around the world with 24/7 access to an exclusive network of collectors, and get all the performance data you need to decide when to buy and sell.
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** Past performance is not indicative of future success; the performance was calculated in GBP and will vary in other currencies. Any investment involves risk of partial or full loss of capital. The Cult Wine Investment Performance is a hypothetical tool. The results depicted here are not based on actual trading and do not account for the annual management fees that may be charged to a Cult Wines customer which ranges from 2.95% to 2.25% depending on the size of the portfolio, and there is no guarantee of similar performance with an investor’s particular portfolio.
1From January to June of 2022, the Liv-ex Burgundy 150* achieved returns of 23.90%. And in Q2 alone, the index saw 8.09% returns.
https://www.wineinvestment.com/learn/reports/fine-wine-investment-outlook-2022/
2https://www.wineinvestment.com/learn/reports/bordeaux-en-primeur-2021-report/
3https://www.wineinvestment.com/learn/reports/burgundy-report-2020/
4https://www.wineinvestment.com/learn/reports/champagne-investment-report2021/
5https://www.wineinvestment.com/learn/reports/rhone-investment-report-2021/
6https://www.wineinvestment.com/learn/reports/italy-investment-report-2021/
7https://www.wineinvestment.com/learn/reports/emerging-markets-and-us-report-2021/
*https://www.liv-ex.com/news-insights/indices/
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