MD & FOUNDER OF FINE WINE MERCHANT BORDEAUX INDEX
AS THE giddy prices achieved at the recent auctions in Hong Kong confirmed, the right price for anything is what someone’s willing to pay for it. With premia to market averaging around 60 per cent on over £10m of widely available stock, it speaks more of the bidders’ zeal than of the market reality.
But looking at the fine wine market more broadly, as prices continue to canter up and the investment play becomes ever more pivotal, then price transparency and settlement certainty grows in importance.
I take the view that market professionals, as for financial services, should be able to look after themselves. By contrast, private clients need some protection.
Don’t get me wrong, I’m not calling for the Financial Services Authority (FSA) to ride into town but I do think the leading players in the sector need to up their game. Even a cursory glance at the weekend papers reveals a small army of wine investment companies looking to service the private investor.
While I welcome new market entrants, I have reservations about the promises made and, above all, some of the prices charged are rarely seen outside of Knightsbridge or the auction houses of Hong Kong.
Caveat emptor for sure, but the market ought to be able to provide sufficient price transparency such that the credibility of the activity is protected.
The price search websites are a good starting point but they are of limited use in a fast-moving market.
Elsewhere, the trade platforms are also useful but they tend to exclude non-trade participants and they have really weak coverage across even the most mainstream of wines.
Our own LiveTrade screen, which gives real-time bid-offers across all of the top investment wines, has grown rapidly over the past couple of years.
It is now regarded as a part of the
market’s infrastructure. There is growing evidence of a clear demand for a market-making role in this notoriously fractured market.
The next steps will be to improve the reliability and visibility of trade in en primeur (non-physical) wines and make moves towards dematerialised settlement.
This is hardly cutting-edge innovation but the kind of measures that will build flexibility and certainty.
All these efforts towards transparency might sound like turkeys voting for Christmas but I’m firmly of the opinion that the more we improve the reliability and the cost of fine wine trading, the more activity and liquidity can grow.
There are exciting times ahead for the wine market and we have to make sure that all parties have the right tools to take advantage of them.