Wine Investment Fund Sees Value in Mature Medoc Vintages

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,” Smith said in London. “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 12 percent. 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.

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.”

Left-Bank Wines

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 pounds on Liv-ex on May 22, little changed from the 3,800 pounds at which a similar case changed hands in December 2012, according to Liv-ex data. A case of Latour 2008 sold for 3,600 pounds on the exchange on May 7, down 18 percent from 4,400 pounds in December 2012.

“The market now is well below the trend line,” Smith said, following annual declines in the Liv-ex 100 of 15 percent in 2011, 9 percent in 2012, 1 percent last year and 4 percent so far this year. “The overall market situation presents plenty of opportunities, particularly if you take a longer-term view.”

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 16 percent of Bordeaux trade by value,” Liv-ex said in its monthly Cellar Watch market report. “This year the 2013s took just 3.3 percent.”

Smith said that sterling strength has played a part in pushing wine prices lower, because of the U.K.’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 euros from 1.17 euros over a similar period.

“The fall in the wine indices really closely mirrors the rise in sterling,” Smith said. “This is a real sticking point for wine.”

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