Fine wines have long boasted a reputation as a defensive asset in comparison to other types of investments. As investment grade, fine wines are produced in finite quantities. Thanks to its progressive rarity, it tends to be an investment that predominantly evades the challenges other commodities experience in periods of economic downturn.
Fine wines tend to retain their diversification benefits even during broader economic deterioration, showing wine investments remain viable alternative assets because of their stable and defensive qualities against the usual volatilities of the wider investment market.
Increasing wealth in emerging markets, particularly in Asia, continues to grow the market for fine wine and will undoubtedly continue to do so in the coming months, years.
Fine wine investment compared to gold in 2021
Over the past few years, there have been many times where the gleaming yellow metal hasn’t fared well compared to the liquid asset. It would seem Gold isn’t the precious metal it once was compared to the less volatile fine wine investment market.
When we look at the key performance headlines of 2021, it’s clear that wine has significantly outperformed gold as an investment, which is saying something considering the country has been dealing with a global pandemic, Brexit and international trade wars.
According to Live-Ex statistics, gold was down by almost 8% one year ago, whereas fine wines had increased by over 17%. When we look at this latest quarter, gold is still down by around 4%, and wine is still up by almost 4 percent.
These statistics certainly paint a picture when you consider that September has historically been a positive year for gold. Global supply chain issues and rising inflation have meant that gold has not performed as well as previous years, although, compared to fine wine investment, the latter tends to be a more stable investment choice.
The improvement in gold as the year has gone on is likely due to the markets starting to stabilise, if only a little and also due to the strengthening of the dollar.
Is fine wine the safe haven asset?
Burgundy was the leading regional performance investment which saw year to date growth of just over 18%, and sparkling wines were also up by over 18% in some of the main Champaign producers such as Taittinger and Dom Perignon.
As with many previous years, fine wines are proving to be a stable investment compared to many of the other types of investments and certainly is a wise way to diversify your portfolio.