Why Invest in Wine
For someone looking to diversify their portfolio, wine investing is an interesting start. The London International Vintners Exchange (Liv-ex) is known as the leading wine trading platform in the world. Their popular index, the Liv-ex Fine Wine 100, has increased by 300% since 2002. For reference, the S&P 500 has returned about 490% during the same period. Despite a lower total return, it’s worth considering that fine wine offers exposure to a completely uncorrelated asset. Also, the Liv-ex 100 is just an index—it’s entirely possible to see better returns through sound due diligence. Returns on fine beverages tend to increase during sharp market downturns as investors seek opportunities outside equities.
For a beverage, however, wine investments can be surprisingly illiquid. It is important to note that wine can take anywhere from 3 to 7 years to achieve peak value after investment. That being said, the discussed platforms are open to any individual—you don’t have to have a high net worth to invest in wine nowadays. We think it’s worth considering putting money into one of these platforms if you’re already maxing out your retirement plan and have additional income you’re looking to invest. If you need more information on what accounts you should be contributing towards, check out our previous article here.
Platforms
Vinovest
Vinovest was launched in 2020 and has taken a hedge fund approach to wine investing. In their “Manage” platform, you deposit money and their experts will purchase bottles of wine on your behalf. Once they purchase a bottle, you do actually own the wine. This means you could in theory drink your investment if you so desired. Also, you can sell your wine early if you need to access cash; Vinovest imposes a 3% fee if you sell before three years from the initial purchase date. They have a fee structure that is completely dependent on how much you have invested: as you invest more money, they take lower management fees. You can see this easily in the image below.
You need to invest at least $1,000 to kickstart your portfolio. It’s important to note that they do take fees with no regard to how much money you made—or lost—in that year. Their fees are mainly used for storing your wine, thus why you need to pay a fixed percentage every year. They target approximately a 12% annual return net of fees, which is a bit higher than the S&P 500 over its history. This is, however, just a target, and annual returns can certainly vary. It’s worth mentioning that there is a large boost from the Starter to the Plus tier because you gain access to “Premium wines.” After you reach the Premium tier, you can add in “rare, auction-only wines,” which can contribute significantly to annual profits.
For those looking to be more hands on in what they purchase, Vinovest also offers a “Trading” platform. Vinovest “handpick[s] a limited supply of high-performing wines from a top wine region” every few weeks. As of now, you only have the ability to purchase additional bottles; however, they do mention that users will be able sell their bottles in the future. Check out their collections page to see more information.
Vint
Founded in July 2019, Vint offers a far different platform than Vinovest. Users can purchase “shares” in different collections through their LLC. You don’t own physical bottles, but rather a piece of the set. The following three are their most recent offerings as of writing.
Vint purchases a collection of beverages which are typically from a similar region or have a theme behind them. In addition, Vint publishes a due diligence report detailing their reasons for the purchase. They provide informational highlights, list all of the wines in the collection, and note the total number of bottles or cases. You can see from the image that they issue variable numbers of shares which may cost different amounts depending on the total collection value. It seems as though collection shares cost between $25 and $70 with a $50 average cost. Not only do they sell shares in wines, but they have also run whiskey and cask collections, too. Their unique selections can provide additional diversification into more broad fine spirt investment opportunities.
Vint does a great job of aligning themselves with their investors; in fact, they have no annual fee. They only take a small sourcing fee per collection, and it appears as though most of their profit comes from owning the bottles. They state that they own anywhere between 0.5% and 10% of each deal. Since Vint is investing alongside you, they must have full belief in the products they’re offering. They take serious precautions to avoid purchasing knock-offs by working closely with trusted sourcing partners. Vint appears to source a new investment opportunity every two weeks, so there are many chances to invest if you do not feel strongly about a particular deal. They mention, but have yet to develop, a secondary market to prematurely sell out of investments.
Final Thoughts
Vinovest and Vint offering two very different approaches to wine investing. If you have a higher net-worth and can afford to lose access to capital for at least 3 years, Vinovest might be right for you. They seem to work much more closely with their higher tier investors where they can deliver better returns. Vinovest’s high fees are certainly worth reconsidering— On the other hand, Vint is great for a newcomer to alternative investments with their low share prices and access to premium beverages. Vint’s minimal fees are extremely tough to beat, and they also offer deals outside of wine for additional diversification. If wine isn’t your cup of tea, you can check out another alternative investment article on P2P investing.
