Why not wine? Cult Wines has become the go-to boutique firm for fine wine investing

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Investors recently received a report that, as of June 30, 2022, the California 50 index returned 28.2 per cent versus the S&P 500 Total Return Index, which had declined by 10.62 per cent over the past year*. But the California 50 doesn’t reflect a selection of high-tech companies founded in the Golden State. Instead, it represents a selection of investment-grade wines diversified primarily across the Napa Valley and Sonoma County.

Welcome to the world of Cult Wine Investment, which has, for a decade, combined data-driven insights with a keen appreciation of fine vintages sourced from the great wine growing regions of the world. The wines in the index represent actual cases of the good stuff, owned by individual investors, and are predominantly housed in a state-of-the-art, climate-controlled storage facility in London, England. As portfolios evolve, wines are sold and new cases are added to investor holdings.

“We approach fine wine investing in the same way any discretionary investment manager would,” says Atul Tiwari, chief executive officer, Cult Wines Americas, who oversees the Toronto office of the company, one of six global locations. “Our selections are based on the potential for price appreciation, which is rooted in supply and demand. There’s only a finite amount of investment grade wine made by producers every year and then over time, as a result of consumption, the supply decreases, demand increases and prices tend to go up.”

It’s a growth market driven by an increase in demand that’s seeing more and more countries developing fine wine drinking cultures, he says. Wines have also represented a solid hedge against inflation. And, with bonds currently unable to fulfill their traditional role of ballast in a portfolio, wines are ready to fill the void.

“Fine wine offers low correlation to traditional equities and bonds, and low volatility against equities, bonds and other asset classes,” Tiwari says. “And fine wine also offers low downside capture. When equity markets tank, as we saw this year, wine prices barely decline — or as seen this year, they actually go up. For many, wine is a non-discretionary purchase that represents the last thing in their lives they would let go.”

Olivier Staub, chief investment officer at Cult Wine Investments, based in London, oversees an investment team that allocates investment across fine wine regions, including Bordeaux, Burgundy, Italy and California.

“Factors we look at include the brand, the producer, and historical price performance from a particular wine or vineyard,” Staub says. “We also consider the scarcity of good quality wines made in small quantities, which have higher potential for appreciation. Investments in a particular winery may increase its potential and we’re always looking at top producers who are acquiring new parcels of land or vineyards across the world.”

Cult Wine Investment estimates that $6 to $7 billion worth of investment grade wine are produced across the globe annually. The company currently manages wines valued at more than $400 million, making it the world’s largest fine wine manager.

Canadian wines aren’t currently part of Cult Wine’s holdings. That’s not because the quality of its vintages is lacking, but because the liquidity doesn’t yet exist on global markets to assure a timely exit or active management.

Cult Wine offers investment opportunities for Canadian investors starting at $12,500, which allows enough investment capital to build a diversified portfolio across regions. Investment performance can be tracked against the Liv-ex Fine Wine 1000 index, which tracks prices of 1,000 wines from across the world, calculated monthly.

Fine wine is mainly stored in London because it represents the hub of global fine wine trade. Unlike distilled products, wines have a narrower shelf life. As part of its active management service, Cult Wines informs investors when the quality of a particular vintage they hold is about to crest and informs them of the risk/reward ratio of holding it further. These wines can then be offered on an active secondary market, which includes fine wine merchants, hospitality industry buyers and individual purchasers.

Cult Wines is aiming to democratize that market and make it more efficient with this year’s launch of CultX, a blockchain-based investment and trading app. It allows users to build, track, trade and manage a portfolio of fine wines, while eradicating inefficiencies between buyers and sellers.

Cult Wines investors are often wine aficionados who are not unknown to sample a bottle of their own holdings. As much as Tiwari leverages his background in asset management in his role with Cult Wines, he’s also no stranger to enjoying an excellent vintage.

“It’s not investment advice, but you can’t go wrong with a nice glass of Burgundy,” he says.

*Liv-ex and S&P 500 as of June 30, 2022.

For more information on Cult Wines, visit www.cultwines.com

For more information on PBY Capital, visit www.pbycapital.com

PBY Capital Limited is registered as an exempt market dealer and an investment fund manager with Canadian provincial securities regulatory authorities, servicing family offices and their professionals. For more information, visit: www.pbycapital.com.

This story was created by Content Works, Postmedia’s commercial content division, on behalf of PBY Capital Limited, which is a member and content provider of this publication. The opinions and information provided in this article are solely those of the writer and are not to be construed as personal, legal, accounting, taxation, or investment advice, or as an endorsement of any entity.