The array of attributes within Fine Wine as an asset is what makes it such an interesting solution to a wide range of investment problems. It is not just an investment that will give you something interesting to discuss at your next dinner party, but one that aligns with your sensible side.
At the most basic level, fine wine is a tangible asset and will always hold some form of value or worth. The assets relative immunity to inflation and currency devaluation can be utilised as a store for capital in times of uncertainty, while truly global demand ensures maintained value and liquidity.
A core attribute of a “passion asset”, is the lack of correlation between its own changing value and the fluctuations of central financial markets. In recent years the disparity in performance between the marketplaces has remained pronounced, even against the broadest measure of the market (Liv-ex 1000). In addition to differences in overall performance, the graph below illustrates the difference in volatility between the asset classes. The FTSE has recorded extended peaks and troughs within a 11+% standard deviation spread. While the Liv-ex 1000 has remained stable, with a spread of under half that of the FTSE.
The graph shows wine trajectory to be exceptionally different to the various other financial measures. This lack of correlation is what makes the asset so useful in times of financial turmoil. With 1.00 being absolute correlation congruence, it is worth noting that the Liv-ex 1000 showed less than 0.3 correlation across all measures—a staggeringly low unilateral rating.
Correlation between the FTSE 100 and Fine Wine the resulting score is a statistically negligible 0.04.
Fine Wine continues to show low levels of volatility, even when core markets are under extreme duress. Throughout 2020/21 the Liv-ex 100 index traded within a X% range, while equity and commodity markets saw widespread volatility.
This level of stability is typically found in assets lacking in real potential for creating Alpha, or an active return. This is where Fine Wine differs with a remarkably strong history of compound growth.
Throughout 2020/121 the Liv-ex 100 index traded within a X% range.
Fine Wine sits at odds with traditional assets in a number of fundamental ways. It is these differences that make it such an appealing diversifying asset.
With this stability and juxtaposition to central markets remains a propensity for growth comparable to high level risk asset classes. The most compelling statistic here is the annualised average growth of 10.1%. When compared with the FTSE 100’s 4.7% over the same period, Fine Wine appears very favourable. You are emboldening your portfolio with an asset that under duress remains stable, yet in times of bullish markets can kick on to achieve double digit returns.
Liv-ex 1000 showed less than 0.3 correlation across all measures – a staggeringly low unilateral rating.