What to consider when investing in fine wine

Investing in fine wine offers a reasonable return on investment and is a safe way to diversify and Covid-proof your portfolio. But Strauss & Co’s wine specialist Higgo Jacobs warns not to hightail it down to your nearest wine merchant and buy the most expensive red in the shop. Instead, you should approach your wine investment with the same caution and meticulous planning as any other stock portfolio.

‘Swagging’ economy

Jacobs says wine falls into the so-called SWAG-assets – Silver, Wine, Art and Gold –  that delivered exceptional performances during the past 15 years.   Wine’s other competitive edge is that it is not tied to the economy, turning it into a hedge in tumultuous times, unlike stocks or even e-currencies. Another bonus: the more bottles of a particular wine that are drunk, the more the remaining supply appreciates in value. This is because Fine Wine has a finite number of bottles, originating from a specific place and only made once a year. After its release, that specific vintage gets rarer as the stock is depleted.

Buy from the right merchants

Critical when investing in wine is that you should be aware of the wine’s provenance – its history, and particularly its authenticity, and where it has been stored. Picking the right merchant is crucial for this. Reputable merchants also ensure that your wine has been transported and stored properly because, in a hostile climate, wine can spoil in less than a day. Jacobs underscores that Strauss and Co follows a process of due diligence, ensuring that the wine offered on auction has been kept in the right conditions, from the moment it was bottled until the moment the hammer falls. And no, that Kanonkop Paul Sauer 2010 stored upright on your kitchen counter will not pass muster  with a reputable wine merchant.

Business or pleasure?

If you’re buying fine wine with the sole purpose of enjoyment, you probably can get away with stashing it in the coolest, darkest place in your house. But investment wine requires a pedigree of where the wine was stored. Most South African houses are not fitted with the required wine cellar to properly store investment wine. Jacobs advises investigating proper cellaring companies such as Wine Cellar, which offers discerning collectors wine storage facilities that will protect the provenance of the wine and ensure that it matures correctly.

What do I buy?

“As with art, the beauty of wine collecting is buying a tangible asset that you can enjoy,” Jacobs says. In the world of international investment wine, pricey French Bordeaux is the essential purchase. The good news is that more reasonably priced South African wine is coming into its own in the investment world. “The most important thing for me, however, is investing in what you love,” Jacobs advises. If you prefer the maverick winemakers of the Swartland, look out for a Columella from Eben Sadie, or a Granite or Schist from the Mullineux families. More of a traditionalist? Wine estates such as Meerlust in Stellenbosch and Klein Constantia in historic Constantia have proven track records of more than a century. But be sure to conduct proper research, tracking wine’s performance the same way you would manage your stock purchases. Conduct your due diligence by browsing through previous auctions, and stay up to date with accolades.

Track the trends

“High ratings from reputable wine critics, such as Tim Atkin have a big influence on the appreciation of your wine collection,” Jacobs says. Atkin’s special South African report that he delivers every year has definitely shaped prices in the market. Even in a region such as Bordeaux, which is the historic cradle of investment wines, the release prices (known as en-primeur) are not immune from ratings. If a big hitter talks up a wine, its value is sure to increase.