First growths best place for gains as recovery in wine market widely anticipated
Mature vintages dating back to the 1990s from top Bordeaux estates are among wines offering the best opportunities for gains after a three-year market slump, according to a manager at The Wine Investment Fund.
While Bordeaux from recent years including 2008 and 2009 has continued to drop in price over this year, clarets from 1995 have held their value better as stocks are being drunk down, Investment Manager Chris Smith said in an interview.
"The mature vintages are where the real opportunities are," Mr Smith said.
"If you're anticipating a recovery, as we are, I think first growths are probably the place to be."
The Liv-ex 100 Index of benchmark wines, predominantly from Bordeaux and including producers from areas such as Burgundy, the Rhone, Champagne and Italy, has dropped for 13 straight months, bringing its decline since the end of March last year to 12pc.
Waning Chinese demand combined with a run of three difficult vintages in Bordeaux following the highly priced 2009s and 2010s has hurt investor appetite for wines from the region.
Mr Smith said that first growths "tend to overperform on the way up and underperform on the way down, so they're slightly more volatile than the rest of the market."
First growths from the left bank of the Gironde estuary, reflecting a list drawn up for Napoleon III's Paris exhibition of 1855, include Chateau Lafite Rothschild, Chateau Latour, Chateau Margaux and Chateau Haut-Brion. A fifth estate, Chateau Mouton Rothschild, was added in 1973.
A case of Latour 1995 sold for £3,750 (€4,451) on Liv-ex on May 22, little changed from the £3,800 (€4,510) at which a similar case changed hands in December 2012, according to Liv-ex data. A case of Latour 2008 sold for £3,600 (€4,273) on the exchange on May 7, down 18pc from £4,400 (€5,223) in December 2012.
"The market now is well below the trend line," Mr Smith said, following annual declines in the Liv-ex 100 of 15pc in 2011, 9pc in 2012, 1pc last year and 4pc so far this year.
Muted demand for the latest Bordeaux vintage has been reflected in lower volume on the Liv-ex market.
"In April last year, the new 2012 vintage accounted for 16pc of Bordeaux trade by value," Liv-ex said in its monthly Cellar Watch market report.
Mr Smith said that sterling strength had played a part in pushing wine prices lower, because of the UK's pivotal role in the global secondary market for wines. The pound was trading at $1.67 yesterday in London compared with $1.51 in May last year, while against the euro it climbed to €1.23 from €1.17 over a similar period.
"The fall in the wine indices really closely mirrors the rise in sterling," Mr Smith said. "This is a real sticking point for wine." (Bloomberg)