Wednesday, May 22, 2024
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Home » Wine Investment Strategy: RareWine Executives Describe A Winning Portfolio

Wine Investment Strategy: RareWine Executives Describe A Winning Portfolio

by Harley Bennett
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Historically, wine is the best investment, according to the two top executives at RareWine Invest, headquartered in Denmark. However, building a portfolio of the correct types of wine is critical for success. In a recent Zoom interview, CEO, Mads Lund Jensen and CMO, Lars Granat Jensen, shared average returns for their investors, as well as the fine wine investment strategy they use to create winning portfolios.

“The performance of wine under management at RareWine Invest in 2022 was 22.5 %, and our annualized performance for the past five years was 12.88 % per year,” reported Lars Granat Jensen, CMO. Given that the average return for fine wine is around 10%, according to Liv-Ex index, these results are impressive.

However, Lars added that the real judgement day is when the wine is sold and positions are realized. “Last year 1,115 positions under management at RareWine Invest were realized and the average return was 88%.”

The minimum investment for a RareWine customer is €10,000 ($10,752), but the average size of a portfolio is €67,000 ($72,042). Altogether, the value of wine under RareWine’s administration is €165 million + ($177 million+).

“We were established in 2016, but we are actually part of a larger company called the RareWine Group, started in 2006,” explained CEO, Mads Lund Jensen. “We also have a trading arm, called RareWine Trading, so we can help our customers sell their wine.”

In addition to Denmark, where the wine is warehoused, the company also has offices in Sweden, the Netherlands, Italy, Switzerland, Denmark and England.

Putting Together a Winning Wine Portfolio

So how do the RareWine executives manage to achieve such impressive results? The answer lies in assisting their investors to carefully select the wines they want to include in their portfolios.

“Right now we are bullish on Burgundy, Champagne and Italy,” said Lars. “We only work with the safe bets. We don’t make risky investments. There must be a proven track record, and it must be based on data.”

Interestingly, they do not recommend Bordeaux at this time. “The current En primeur (wine future) system in Bordeaux must change, or we don’t think it is a good investment. It causes the prices to be high, so people have to save Bordeaux, hoping the price will increase over time, but lately that hasn’t happened.”

An average portfolio at RareWine Invest will consist of 25% to 40% Burgundy, 20-40% Champagne, 10% – 20% Italian, and 10% in the rest of the world, such as Napa Valley, the Northern Rhone, Australia, and a few other locations.

Mads and Lars said they evaluate around 4,000 different wines per quarter, and make a decision on which wines to include in portfolios based on the average daily trading price on their platform, as well as Live-Ex, and other databases.

Critic scores are another important part of their evaluation, and they follow scores from the Wine Advocate, Vinous, James Suckling, Allan Meadows, and other acknowledged wine critics.

RareWine has also recently started to invest in fine whisky. “Whisky has gone up 373% in the last 10 years,” stated Lars.

“An important part of our evaluation process is authentication to insure the wine we purchase has not been counterfeited,” reported Mads. “We have one of the best authenticators in the world, as well as equipment that analyzes 200,000 high resolution pictures, so we can see eight layers of paper fibers. We can also compare the bottles with those in our trading house, because we have such a large selection of fine wine.”

Keeping Sentiment Out of the Equation When Investing in Wine

Many wine lovers are obviously attracted to the world of fine wine investing, because even if the wine doesn’t increase in value, they can still enjoy drinking it. However, Lars and Mads caution against this.

“It is important to put feeling aside when investing in wine,” stated Lars. “People dream of taking wine out, but if you have 12 bottles, and you drink one, then you lose the value of a full case. Instead just purchase one bottle from the trading house or other retail establishment.”

“Many people think that wine investment is only for people who know about wine, but it is becoming more common for people to invest who don’t know about wine. It’s not about the taste of the wine, it is about the value and the time to sell,” explained Mads.

The Future of Fine Wine Investing

When asked about the future of fine wine investing, both executives were quite positive, even though they experienced some highs and lows due to the Covid pandemic.

“During Covid people wanted to drink better wine, so wine prices went up. Now with inflation and higher interest rates, people have less money to spend. So since late last summer, we have seen wine prices going down,” reported Lars.

“However, we believe that for the next couple of months that the market will not have large demand, but then will go back up,” he continued. “Therefore, we bought lots of Champagne when prices were down. We know that the price of land in Champagne has gone up 25%, and we believe Champagne is under-valued. We only predict the future based on data.”

The two executives are also positive about China, the Middle East, and India as new fine wine and whisky markets. “We are still bullish on China, because it still plays a large part in the fine wine world, and in 5 to 10 years, we believe the Middle East will also be more recognized, despite religious beliefs,” said Mads.

“And it’s important to remember that India is the biggest whisky market in the world, and they have reduced their import taxes from 200% to 100%,” concluded Lars.

So what is the future goal for these two executives in terms of RareWine Invest? You may not be surprised to learn that it is to move from the #2 top global company in wine and spirits investing to #1. “We aim to become the biggest fine wine investing company in the world,” said Mads, with a big smile on his face.

Source : Forbes

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