Wine Investing

Introduction

The Market

With a long-run return of >10% pa, fine wine boasts an impressive track record. Furthermore, the combination of fast-growing global demand and dwindling supply that drives price growth is arguably more acute today than at any point in recent decades. The expansion of international HNWIs, increasing consumption and a focus on alternative assets are just some of the key dynamics that suggest further compelling performance in the years to come.

A Global Perspective

With an unparalleled network of private clients across the US, privileged access to major European producers, traders and exchanges as well as a fast expanding Asian business, Vinfolio is perfectly positioned to manage your wine portfolio. Our international exposure and contacts give us the broadest dataset for analysis, the most consistent liquidity and help us maximise returns throughout your investment.

Unparalleled Investment Expertise

Our strength lies not just in the sourcing of fine wines at the best prices, but also in our use of technology to create a platform that provides both buyers and sellers with all the requisite tools and intelligence to successfully build and liquidate a wine portfolio.

In addition to our Marketplace platform, we have proprietary access to crucial flow-data which lies at the heart of all our decision-making. Our algorithm dynamically looks at current US retail listings, auction sale prices, and sales on our own platform to determine what is the current fair market value of a given wine. From there, we can trigger buy or sell activities to ensure a sound investment and a healthy return.

It is for all these reasons that we firmly believe that Vinfolio is home to the most comprehensive, reliable and honest investment service available.

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Vinfolio’s Investment team

Company Ownership

Vinfolio is majority-owned by Executive Chairman Don St. Pierre Jr. and his business partner and good friend Allan Warburg, co-founder and co-CEO of Bestseller Fashion Group China. Vinfolio’s ownership also includes Jean-Michel Valette MW, who chairs the Education and Examination Board (EEB) of the Institute of Masters of Wine and is former chairman of Robert Mondavi Corporation and Peet’s Coffee; Jon Moramarco, former CEO of Constellation Brands, and Steve Case, founder of AOL and co- founder at venture capital firm Revolution.

Senior Management

Don St. Pierre

Executive Chairman

In 1996, Mr. St. Pierre co-founded ASC Fine Wines, which he built into Greater China's leading importer of premium and fine wines. In 2010, he sold the company to Suntory Holdings. At the time of the sale, ASC had 1,200 staff in 26 offices, and over 100 exclusive importing relationships with elite international wineries. After selling ASC to Suntory Holdings, he stayed on as CEO until 2012, and remained as a Board member and Senior advisor to Suntory Wine International until December 2015. Don is the recipient of numerous wine industry accolades, including being named No. 7 on Decanter magazine's 2011 Top 50 global wine industry power players and being selected by Wine Enthusiast Magazine as the 2011 International Man of the Year.

Jean-Michel Valette, MW

Board Member & Investor

Jean-Michel has held various executive roles in the wine industry, including CEO of Franciscan Estates and Managing Director of Robert Mondavi winery. He is currently an advisory board member to a number of wine families in Napa and serving a term as chair of the MW exam and education board. He also sits on the board of Peet's Coffee, Boston Beer Co, and Sleep Number Corp. He has been a board member and investor in Vinfolio for over a decade.

Adam Lapierre, MW

President

In addition to being one of fewer than 380 Masters of Wine in the world, Lapierre has an impressive background playing various industry roles both, as a supplier and a buyer. Adam also serves on the Education Committee for the Institute of Masters of Wine and regularly judges at top wine competitions around the world.

Investment Grade Wine Performance

Investment grade wine has performed extremely strongly against just about all major asset classes over the last three decades. With the exception of a few outlier years where returns exceeded 20+% per annum, the long-run character of the market is one of stable, attractive returns and low volatility. Analysis of a representative selection of the foremost traded IG wines reveals a Compound Annual Growth Rate of 11% since 1988. In context, the returns for US Equities (DJIA), UK equities (FTSE), Asia equities (Hang Seng), Gold, and Oil for the same period were materially lower.



Furthermore, wine has a pleasingly low correlation with other assets during periods of market disruption, a valuable support to a diversified investment portfolio. The search for diversification is a prominent feature of today’s investment landscape as investors, large and small consider afresh S.W.A.G and other ‘passion investments’.



Traditionally, the Wine market had been absorbed by only the most celebrated Bordeaux properties. However, over the last two decades global demand has shifted sufficiently to support iconic wines from Burgundy, Champagne, Italy and the US.



These changes have further underwritten diversification and created a more rewarding investment environment.

“Wine has an attractively low correlation with other assets during disruptive market phases, making a valuable addition to a diversified investment portfolio”
While Vinfolio cannot provide tax advice, note that wine investment is generally considered to be exempt from US Capital Gains Tax and similar benefits may exist in other regions.Source: Bloomberg

Assets Character: Low Volatility and Correlation

Wine generally exhibits lower volatility than equities and gold

Rolling 5yr Compound Annual Growth

Rolling Annual Standard Deviation

Low correlation with other asset classes

We also witness wine exhibiting low correlation with other asset classes, including – significantly – during disruptive market phases (when the correlation is also usually negative).

Global Financial Crisis (Aug 2007 - Mar 2009)

Wine Performance: +1.8%

Eurozone Crisis (Jan 2012 - Mar 2013)

Wine Performance: -0.8%

“Taper Tantrum“ (Jun 2013 - Sep 2013)

Wine Performance: +0.7%

Q4 2018 Sell-Off (Oct 2018 - Dec 2018) DJIA -0.93 0.16 0.88

Wine Performance: +0.8%Source: Bloomberg

Supply & Demand

As for any asset, wine prices are driven by the interaction of Supply and Demand.
Uniquely, the consumption of wine (increasing rarity) and the improving nature of wine as it ages means that the balance shifts heavily towards Demand over time, applying upwards pressure on prices.

Supply

Unlike bottles for everyday drinking, investment grade wines operate in the context of a structural market shortage. With iconic estates (often legally) constrained by the link to particular physical vineyards, the weather and a relentless pursuit of quality, only a small amount of truly IG wine is produced. We estimate the cumulative global pool to be $50bn, around 5% of global production.

Established track record, real estate costs and availability, legal classification (e.g. AOC,AVA, DOCG etc ) and collective critical assessment creates extraordinary barriers to entry for new IG wines. In short, disruptive increases to supply in the form of new properties are impossible. Finite and often diminishing production with increasing consumption over time as the wines improve, makes for acutely constrained availability as wines mature. Try shopping for immaculate cases of 61 Latour and report back...

Demand

Over the last 15 years the fast growing market economies of China, South Korea, Taiwan and wider South East Asia have established themselves as important regional players in the international fine wine trade. With this expanding international support, the top fine wines are well established as some of the most exclusive global luxury goods. Fine wine demand overall is confidently global as traditional markets in the US, UK and Europe continue to consume greater volumes and passion for collecting and appreciation grows unabated.

A feature of today’s improvements in viticulture and winemaking is to make many of the worlds most iconic wines more accessible throughout their life cycle. Indeed shifts in consumer habits regarding drinking dates can offer notable opportunities from an investment perspective.

Know Your Market

Market Drivers

High Parker scores, Wine Spectator awards and expensive marketing do not guarantee investment grade wines in isolation. Even amongst age- worthy, highly regarded estates, only a small proportion have the accumulated characteristics to achieve consistent, meaningful capital growth.

Vinfolio’s proprietary program allows us to define the most in- depth view of market dynamics available – including trading flows, inventory and prices across all key global markets. Combined with our analysis of critics’ assessments, brand and vintage strength and local and international market trends, we have both the information and expertise to make the right decisions for your portfolio.

With this expanding international support, the top fine wines are well established as some of the most exclusive global luxury goods

Critics’ Assessment

In many respects, the Standard & Poor’s or Moody’s of the wine world. Where traditionally, Robert Parker and his eponymous Wine Advocate went largely unchallenged as the dominant voice, today a slew of newer publications compete both regionally and by product. With more information available than ever before, it’s critical to be able to define where confluences of critical opinions interact with the market.

Vintage

Vintage affects both the overall level and shape of the price curve over time. Clearly great vintages are more celebrated and collectable but even amongst qualitatively comparable years, individual ‘halo’ vintages can command an enduring premium. Qualitative characteristics also affect rate and timing of consumption.

Soft Data Trends

The balance of demand from consumption and investment passive or otherwise,) regional price discrepancies, opening up / barriers to trade, changes of ownership and outlook for key estates and the ever evolving tastes of different global markets.

Brand Ranking

History, ownership, market presence and size - brand is an important factor in contemporary investment decisions. Of particular importance in navigating demand patterns in the emerging markets.

Inventory

An estimated measure of production, distribution and depletion. A universal data set is almost impossible to acquire, but accurate assessments of inventory are critical to projecting likely price development.

Real Economy

Our models use a variety of headline economic data to help inform our overall outlook.

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Market Outperformance

Stock picking is as essential for wine investment as for any asset class.
Uninformed acquisitions of famous estates or top vintages will often render lacklustre outcomes. Only true market insiders have the data to maximise efficiencies and returns . Key strategies for outperformance may include:

New releases, privileged market access

From first tranche pricing through to disposal of existing assets to take advantage of market conditions – access is key.

Comparative pricing analysis

Price deltas between vintages of comparable qualities emerge frequently. Our analysis makes sure we’re on the right side when those gaps close up.

Geographic price dislocation (arbitrage)

Ability to source wines at a discount in one region and re- distribute at full price in other regions. An international exposure and the ability to negotiate the logistical and legal frameworks of the worlds’ key resale markets is key.

Identification of & access to rare and high-focus wines

The absolute rarest wines can often produce large returns quickly, but only if there is the capability to identify and source. Single collectors can move markets for the scarcest Burgundies or Napa gems, or even older, single vintages of larger production classics – we know who they are and what they’re buying.

Building Balanced Portfolios

The IG market has diversified away from the recent dominance of a few celebrated Bordeaux names, thanks principally to increased global appreciation of other historic regions. In many respects, this represents a return to historic investment activity which was a more direct reflection of drinking and collecting norms.

The market globally has evolved such that Burgundy, Champagne, Italy, Rhone and the US are all firmly investment grade and indeed often now more in demand than Bordeaux. Finally, improved market liquidity and transparency as well increasingly developed networks for storage and shipping have brought down frictional costs for all regions.

Our current portfolio allocation reflects these shifts and, as noted in the chart, demonstrates how getting ahead of latent trends contributes to outperformance.

Typical Portfolio Distribution 2019

Optimized Portfolio Performance

Using market insight, privileged access and best execution our typical diversified portfolios have consistently outperformed broad market measures whilst maintaining balanced risk profiles.

Source: Internal Analysis
* Excludes Dividends Source: LivEx, Internal Analysis

Cellaring & Insurance

Octavian Vaults

Vinfolio has negotiated a partnership Octavian Vaults. With over $2.5bn of wine quietly maturing in their facilities in Wiltshire, England, they are considered the world’s leading long term fine wine storage provider.

The high-security, heavily insulated site boasts cutting edge technology to control temperature, humidity, air quality, light and vibration. Their unique technology tracks each case and bottle individually, maintaining perfect provenance. Considered the blue chip for all the global auction houses and traders. Our international logistics network facilitates movements worldwide at the lowest possible costs and allows us to maximise returns throughout all major markets.

Fixed title

All cases are issued a UK Government tracked, unique rotation number, individually affixed to the OWC, linked to your personal account.

Storage charges & insurance

Storage rates are USD including insurance at full replacement value. Full terms and conditions can be viewed at www.vinfolio.com.

Monitoring Your Investment

The web-based My Cellar function (pictured below) gives real-time valuations for your portfolio. Our valuation algorithm uses a sophisticated combination of live, wider market and historic prices to accurately determine individual wine prices. You will also be provided with a formal annual portfolio valuation and review.



Prefer to build your own portfolio? Vinfolio lists over 4,500 cases of pristine and collectible fine wines available for immediate purchase.