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Fine wine less volatile than other major alternative investments


  • By alex.sullivan@cliftonmedialab.com
  • News

 

Fine wine has proven to be less volatile than other major alternative investments and offers superior risk-adjusted returns as part of traditionally diversified portfolio.

So says a new report released today by Cult Wines, the global leader in fine wine investment management services.

Entitled the Alternative Investment Report 2019.  it benchmarks the financial performance of fine wine against a range of alternative investments including hedge funds, real estate, commodities and fine art. And, says the report, as a tangible asset sharing many of its characteristics with major alternatives and un-correlated with the core financial markets, fine wine was shown to be a very attractive investment option.

The report also found that, whilst most alternatives performed negatively in 2018, fine wine performed strongly and delivered a return of 9.2%; in stark contrast with the -13.8% and -4.8% seen by commodities and hedge funds respectively.

The report also argued that fine wine outperformed both the S&P 500 and commodities during the equity market downturn of 2008 demonstrating that fine wine, as an asset class, provides diversification, reduces risk and increases returns. In an investment context, the lower the correlation to other asset classes, the higher the diversification benefits an asset offer. Correlation between commodities and equities has varied dramatically over the last 10 years, ranging from 0.34 to 0.61, whereas fine wine’s correlation is consistently low, between 00.09 and 0.12, suggesting fine wine can provide very effective diversification benefits for investors.

Olivier Staub, Investment Director at Cult Wines, said: “Alternatives allocation has become more common in the wealth management industry, though it may have mixed results depending on the objectives. Our research makes a strong case for the addition of fine wine to more traditional portfolios.  Its low correlation to other asset classes (including other alternatives) and the excess returns generated indicate that exposure to fine wine provides resilience in tough market conditions combined with the opportunity for capital appreciation.”

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