Investing in fine wine raises more than one eyebrow.
For some, it is first and foremost a drink and not a financial instrument; for others, a hobby, certainly not a true asset class. The wine world is reluctant to see it as an investment, while the financial world sees it more as a curiosity than a concrete opportunity. Yet it is precisely at the intersection of different disciplines that the best ideas are often born, when established certainties are questioned and new perspectives open up. Fine wine has been a store of value for centuries, quietly traded by those who knew its potential, but only recently has its market become structured.
Here we analyse what makes it a unique investment, what factors determine its value and how it can fit into a modern portfolio.
Fine wine, like many commodities, is not for the faint-hearted.
Looking at the graph of the Liv-ex 1000, one might think that its relatively stable trajectory indicates an asset with little volatility and a linear trend over time. However, this apparent stability is deceptive: the index is updated only once a month, hiding the real volatility of a market where each transaction occurs on an individual basis.
Volatility and liquidity are closely linked and, in the case of investment wine, both are more unpredictable than the aggregate data suggest. The wine market is by nature illiquid: bottles are not fungible with each other, as each vintage, producer and storage condition affects their value. Unlike equities, transaction costs are high and bid:ask spreads wider, making it complex to exit positions. Liquidity is cyclical: abundant in periods of euphoria, it dries up quickly in downturns. Historically, when central banks tighten monetary policy, increasing the cost of money and reducing liquidity in the system, prices tend to correct, and vice versa. For long-term investors, this can translate into a premium for illiquidity, but fine wine remains unsuitable for short-term speculators, who risk getting stuck in positions.
Another common misconception, probably fuelled by the idea that wine is a commodity, is that it is an effective inflation hedge. It is not. An asset qualifies as an inflation hedge when its value increases in proportion to the rise in consumer prices, preserving the purchasing power of the invested capital. Wine, on the other hand, performs better under stable monetary conditions and has a historically weak correlation with inflation than assets such as gold or industrial commodities.
However, wine shares some characteristics with gold: it is an asset with no cash flows, dividends or coupons, and is subject to market cycles.
It is also a physical asset, perishable and expensive to store. London has become a hub for trading fine wine thanks to its bonded warehouses, which guarantee optimal storage and a tax-efficient regime until resale. However, Brexit has complicated the status quo, opening up space for other centres, such as Hong Kong or Brussels, which have developed efficient networks of bonded warehouses. A key aspect is that once wine is removed from tax warehouses and moved outside the professional circuit, for instance to a private cellar, it loses its status as an investable asset, unless it has a verified provenance-such as a famous property or a certified rarity, which could make it attractive at auctions. Moreover, since the value of the asset lies in its physical integrity, safe transport and proper insurance are essential elements to protect the invested capital.
As with other commodities, the wine market is influenced by political and regulatory factors. Duties, import taxes and regulatory changes affect production, trade and global demand, while geopolitical dynamics can alter market accessibility and investment costs. A current example is the threat of new tariffs on wine imports in the context of trade tensions between the US and Europe, a risk factor that could reduce demand in a key market.
If wine is not liquid, risk-free, nor an inflation hedge… why invest?
First of all, wine is a drink.
Yet, beyond its cultural dimension, its symbolic value and even its tax potential (being an asset with complex traceability and therefore difficult to tax), fine wine possesses a unique quality that justifies its status as an investment asset: its ageing potential.
Wines enter the market before reaching their full maturity. This creates a time differential between release and optimal consumption, which is both a cost and an opportunity. Unlike most consumer goods, wine improves with time, and this transformation makes it an appreciable asset. Moreover, the progressive consumption of bottles reduces the available supply, generating a scarcity effect that tends to sustain prices over time.
However, storing and insuring wine has a cost, generally around 2% per year. Added to this is the ‘cost of money’, i.e. the interest rate a bank charges for a loan. With low rates, this cost is around 3% per year, while in a high rate environment it can rise to 7-10% or more, depending on macroeconomic conditions.
For example, if a wine from Vintage 2021 is released at €50, by Vintage 2022 its value will have to be increased by at least 10% to cover storage and financing costs. The higher the interest rates, the cheaper the Vintage 2021 will appear in retrospect, and the more expensive the new vintage will appear at the time of release. This effect has an impact on both investment decisions and consumption behaviour, making older vintages more attractive in times of high financing costs.
Diversification and portfolio strategies
Several studies show that fine wine offers a level of diversification in an asset portfolio, showing a low to negative correlation with stocks and bonds.
Furthermore, within the same fine wine portfolio, diversification is crucial: distributing investments among different producers reduces dependence on single labels. A combination of blue-chip wines such as Château Lafite and emerging producers balances stability and growth potential. Investing in multiple regions-Bordeaux, Burgundy, Champagne, Barolo-helps mitigate market fluctuations. Vintage selection is also crucial: great vintages provide the best long-term returns, as discussed in the article ‘The Vintage Equation’.
Some studies even suggest that investors in fine wine can anticipate stock market movements by adjusting allocations according to general financial conditions.
How much is a bottle of wine worth?
Like gold, wine does not generate cash flows or returns and follows market cycles, making its valuation complex. One method is based on the cost of production, which includes, among other costs, labour, raw materials, energy and taxes, creating a kind of minimum price. However, the true value of a wine depends on intangible factors: critics’ scores, producer reputation, vintage quality and scarcity. Therefore, the comparative method, similar to that used for real estate, is often employed.
But in the end, how much is a bottle of wine worth?
Simply, how much someone is willing to pay for it.
Article written by Sara Danese, CFA, combines her financial expertise with her passion for wine in her Substack In the Mood for Wine (https://www.inthemoodforwine.com/).