Can Wine Investments Protect Against an Overvalued U.S. Stock Market?

OenoFuture is a Business Reporter client.

Investors have enjoyed a remarkably successful 12 months since the depths of the pandemic bear market, and are now wondering where markets can go from here. Rising yields on U.S. Treasuries, thanks to improving consumer and business sentiment, has elevated inflation expectations, throwing shade on growth stocks and spotlighting the very high overall valuations of U.S. stocks. Yet amid unprecedented monetary expansion and plans for enormous U.S. fiscal spending, there are strong arguments for both bullish and bearish scenarios ahead.

One safe haven that’s attracting a lot of attention is the fine wine market. This highly sought-after alternative asset offers steady annual returns of 10%–15% and very low correlation to the stock market, and can be an excellent area in which to invest profits from shares that may have become fully valued.

Fine wine’s performance compared with stocks is certainly compelling. If you had invested $100 in the fine wine market in 1952, your investment would now be worth $420,000. On the other hand, $100 invested in the stock market would now be worth a modest $100,000. Typical holds in the fine wine market range tend to be long-term, usually between five to 10 years, but healthy returns can be made in even a shorter time frame. For example, wines from Domaine de la Romanée-Conti, arguably the world’s most prestigious winery, regularly show rises in valuation of 150%—200% over a five-year period.

Unlike almost any other type of investment, fine wine also has the unique advantage of being a tangible asset that’s made to be enjoyed. Most of the world’s top producers create tiny quantities of their best wines every year, and over time, the number of bottles from a given vintage dwindles as they are consumed. This means pricing is mostly determined by a very simple economic model: supply and demand. And after a tumultuous pandemic year, the demand for fine and luxury wine has never been higher, both in established markets such as the U.S and Europe and newer wine-consuming markets such as China and Brazil.

Traditional wine investment, almost exclusively in producers in France, has been a little like the infamous Hotel California: Check in anytime you like, but leaving can be difficult. Finding reliable and timely exit strategies can be challenging. OenoFuture is unique among wine investment companies in being able to offer both multiple and diversified exit strategies and timing advice.

As well as selling your wines on to other collectors and drinkers, OenoFuture supplies wines to many of Europe’s top hotels, bars and Michelin-starred restaurants through our OenoTrade arm. Later this year, we’re opening our first luxury wine shop and bar, OenoHouse, in London, which provides yet another exit strategy for our investors. In both cases, end-clients appreciate access to mature wines that are ready to enjoy without having to pay holding costs.

Investing in wine can seem daunting at first, which is why it’s a good idea to seek expert advice. OenoFuture offers a free, no-obligation consultation call with potential investors to discuss your financial goals and help you select the right wines to match your desired investment risk profile, term and budget.

For some investors, this might be a portfolio of blue-chip wines from iconic Bordeaux estates such as Chateau Margaux, Chateau Latour or Chateau Mouton Rothschild, or top Napa estates such as Screaming Eagle and Opus One. These tend to be longer-term holds, appreciating over a five- to 10-year window, which makes them ideal for building up a nest egg for your retirement or putting your kids or grandkids through college.

Other investors may prefer to go for more wallet-friendly wines that can be sold on through our hospitality partners, generating a return inside a shorter term, typically 12 to 18 months. This process can then be repeated, providing a steady stream of very low-risk returns that can be reinvested as many times as you like, much like the dividend reinvestment model attractive to income-focused investors.

So what’s the catch? Very little. Since it’s asset-backed and demand-driven, fine wine is a very safe and secure investment. Once you invest in the market, your wines are kept in your name in optimum conditions, in a secure bonded warehouse. They are fully insured, and OenoFuture has a dedicated anti-fraud department to ensure the authenticity of your bottles. In almost all cases, we purchase direct from the producer to ensure impeccable provenance.

Unlike other wine investment services, OenoFuture doesn’t charge any management fees. We always put our investors first, and this extends to our profit-share model. We take a modest commission on the profit you make when your wines are sold. This ensures that we only make money when you make money, and we’re constantly striving to offer the best possible service to each and every one of our investors. That’s why we’re seeing record numbers of both first-time and seasoned investors turning to us to protect their assets.

To find out how you could profit from investing in wine and to request your free no-obligation consultation call, visit oenogroup.com.

— Justin Knock, Oenofuture's Master of Wine

_{This article originally appeared on Business Reporter. Image credits: Courtesy of OenoFuture}