Fine Wine performance through COVID-19

It’s no secret that fine wine is a remarkably stable asset, one that any investor should consider adding to their portfolio. Of all the so-called “passion assets”, wine has regularly out performed its competition assets such as classic cars and rare art. It has also outperformed both the FTSE-100 and other stable investment avenues such as gold, over the past 30 years. In the wake of the 2008 financial crash, the Liv-ex 1000 wine exchange dropped around 10% from its pre-recession peak, compared to the roughly 30% drops of the major equity indices.

As the fallout from the Covid-19 pandemic continues to be felt around the world, fine wine investments have remained relatively stable throughout. There have been a number of double-digit losses across a number of equity markets in 2020, however, the peak low recorded by the Liv-ex exchange was a mere 3% in spring, which has now risen back up to only an 0.96% loss when compared to the previous year. In a time of major economic uncertainty, where the USA recorded its single biggest drop of GDP since the Great Depression, it seems that fine wine may represent a port in the storm for investors.

A key facet to the success and relative stability of fine wine is the unique supply and demand dynamic that, in many ways, defines its performance as an asset. The severely limited supply of investment-grade wine worldwide ensures that, even when demand takes a hit in times of economic downtown, the supply will never completely overwhelm demand in the short or the long term.

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