Wealth managers and IFAs are looking to wine investments as a post-Brexit safe haven

 
Francesca Washtell
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Fine wine investments could soar in the next decade (Source: Getty)

A rise in demand for asset diversification and safe havens could drive an increased appetite for wine investments in the next 12 months following the UK's Brexit vote.

More than a quarter of wealth managers and independent financial advisers (IFAs) believe demand will increase over the next year, according to research among 101 intermediaries by Cult Wines.

Nearly half of respondents (48 per cent) said the way fine wine acts as a diversifier to mainstream assets such as equities and bonds will be the main reason behind any boosts in investment.

However, 43 per cent said it was because fine wine makes attractive medium to long-term returns.

According to the fine wine industry's benchmark index, the Liv-ex Fine Wine 100 index, since 1988 the compounded annual return for the most "investible" wines in the market has been 10.65 per cent.

Read more: Fine wine is the best alternative investment in the post-Brexit vote market

The same amount, 43 per cent, cited the popularity of owning tangible assets, while a third said it was because of wine's low correlation with other mainstream asset classes.

The long-term correlation between wine prices and the FTSE 100 is just 0.04.

Almost three in ten intermediaries predicts the level of awareness among high net worth retail investors of alternative assets such as wine will grow over the next two years.

Recently released figures from the Wine Investment Fund show fine wine has delivered annual returns of almost seven per cent since 2003, despite a 36 per cent price correction taking place between 2011-2014.

The worldwide industry is worth around $4bn (£3bn) a year.

"Intermediaries are clearly seeing increased levels of interest in wine and in light of market volatility and poor returns; it is being recognised as a genuine alternative asset class, providing significant diversification benefits from mainstream financial markets," Tom Gearing, managing director at Cult Wines, said.

"Not only can the sector provide strong returns under expert guidance but it is an enjoyable, collectible, tangible asset that has a very exciting future."

Read more: The Brexit vote boosted fine wine sales to Asia

The industry has also recorded a Brexit-effect surge in sales since the referendum, mostly from the weaker pound.

In the week following 23 June, Cult Wines' trade sales increased by 106 per cent on the pre-referendum average figure in June.

The company said the trend has continued since, with "particularly strong demand from US and Asian investors spurred by the fall in Sterling against the US and Hong Kong dollar".

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