While the tradition of investing in wine dates back to the 1700s, the illiquid characteristics of this asset class have, thus far, kept it from being introduced in an exchange-traded product (ETP) format.
The realm of fine wine investment gained prominence during the 1970s when investors began actively trading this commodity, primarily in the United States. The allure for investors lay in the potential for fine wine values to appreciate over time, fueled by factors like shifting consumption patterns and the prospect of tighter market conditions.
What added to the appeal was the low correlation between fine wine and traditional asset classes, making it an attractive choice for multi-asset investors.
Ollie Wilkinson, a member of the sales and purchasing team at Wilkinson Vintners, a reputable fine wine stockholder and supplier, emphasized, “Wine is a well-established alternative asset class and has often been sought after during periods of increased market volatility due to its minimal correlation with other assets. Consistent consumption of fine wines naturally creates a demand-supply imbalance.”
Callum Woodcock, the founder of WineFi, a recently-launched fintech wine investment platform, noted, “It ultimately comes down to convenience. Wine represents a long-term investment, and to directly invest in it, you would typically need £25,000 or more to construct a diversified portfolio. For those who aren’t particularly passionate about the underlying assets themselves, the cost and time horizon can be discouraging.”
Despite Liv-ex’s efforts to establish various indices for tracking the expanding fine wine industry, financial issuers have yet to view wine as a feasible asset for inclusion in ETFs. The primary concern lies in the fact that any vehicle offering daily liquidity for an illiquid asset like fine wine is prone to encountering challenges, particularly when underlying trading activity wanes.
