This Asset Class Is No Longer Just For The Elite

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Fine wine and aged spirits may not be the first thing investors think about when looking to diversify their portfolio, but maybe they should be. For years, the most popular asset classes investors have largely looked at to grow their money have been stocks and bonds, seeking broad diversification between those two asset classes. But with stock and bond performance often volatile and with the recent economic uncertainty, investors are increasingly looking for more alternatives for diversification, which is why real estate and gold are becoming more popular even among the masses. After all, they are physical assets that tend to hold their value, if not appreciate over time. Another alternative investment class – one that used to be largely the domain of the elite – that’s recently been getting attention is fine wine and rare spirits. 

Over the past few years, fine wine and rare whisky prices have surged as investors turn to them as a way to diversify and hedge against inflation. The Knight Frank Fine Wine Icons Index (KFFWII), which tracks a sector of wines that represent the fine wine investment market, is up 149% over the past ten years. Meanwhile, the Knight Frank Rare Whisky index, which tracks the auction results of a basket of rare Scottish single malts, is up 586% over the past decade. 

Why Wine And Whisky?

There are several reasons why the multi-billion-dollar wine and whisky markets make good investments, diversification being among them. In the current environment in which interest rates are up, inflation remains elevated and the U.S. is heading into an election season, volatility is ever-present. As such, many investors are seeking diversification to protect their portfolios. Fine wine and rare whisky are gaining popularity as a way to diversify thanks to their performance. Over the past 16 years, the average annual return on wine has been over 8%. The price of wine is forecast to continue to rise at the same rate in the coming years thanks to scarcity, increasing demand and consumption. Meanwhile, on average whisky has an annual return of 12%.  

Learn more about the fine wines and whiskies.  

Recession-Resistance

They also have a low correlation to the markets. Even in times of turmoil like the Great Recession of 2008 and 2009 and the COVID-19 pandemic, wine and whisky maintained their value. Back in 2008 when the S&P 500 fell 38%, the Live-ex 1000 Index, which tracks fine wine, fell less than 1%. Meanwhile, in 2022, when the S&P 500 fell 25% through the end of the second quarter, fine wine was up more than 10%. Since its inception 20 years ago, the Live-ex 1000 index is up 314.6%. That low correlation could be welcome news to many investors as we move through 2024. 

Scarcity Drives Demand 

What drives prices for spirits casks and wine futures is the scarcity. When distilleries limit the release, the market value tends to soar. As it ages and is consumed, quality and scarcity increase, driving the value of the wine or whisky higher. This gives investors the potential for long-term appreciation, especially given the long-term price trends for wine and spirits. 

Leveling The Playing Field

Despite all the benefits of investing in these two asset classes, historically getting access has been reserved for industry insiders and members of hard-to-get-on allocation lists. That’s changing thanks to companies like Vint. The fully transparent platform for wine and spirits investing is leveling the playing field through its equity products and marketplace, giving investors and consumers access to fine wine and rare spirits with the potential for long-term appreciation. Through its various investment funds, Vint aims to give investors an efficient and tax-advantaged investment product to capitalize on the demand for wine and whisky. Once an asset sale is made, Vint reinvests the funds and any gains into new purchases. 

To give investors the best of both worlds it recently launched the Vint Futures and Casks I (VV-FC1) fund. Open to accredited investors with a minimum investment of $2,500, the goal of the fund is to give investors a blended approach to investing in wine and spirits and capture the quality potential from recent vintages of top wine from Bordeaux and other regions while also leveraging the strong demand and trading activity of spirits casks. The fund has a target composition of 70% wine futures and 30% spirits casks and a projected hold time of five to six years.

Stocks and bonds aren’t enough to build a sound portfolio, investors need diversification. In good and bad times fine wine and whisky have proven their mettle. Companies like Vint are giving investors access to what had been an asset class only for the elite. 

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Featured photo by Stefan Johnson on Unsplash.

This post contains sponsored content. This content is for informational purposes only and not intended to be investing advice.