Founder Of Global Group Johnny Hon Talks Liquid Investments
Global Group Focus
For many, the upside of investing in fine wine is that you get to drink the returns. But people are increasingly coming to see wine as an asset with remarkable financial qualities as well.
Historical analysis shows that returns from fine wine have been more stable than those from stocks, both in the short and long term, which means that replacing some of the equities in a traditional portfolio with wine investments can help to lower volatility. This defensive quality is helping to shift the perception of wine from that of a pure passion play to a serious alternative asset class.
But it still helps to approach the market as a collector, because the best returns come from knowing the market inside out. Johnny Hon, founder of Global Group and a connoisseur himself, has a few rules as a professional collector.
Stick to the very best
The most collectible wines hold their value best and are easiest to sell. This generally means buying Bordeaux such as Lafite Rothschild, Pétrus or Le Pin; or Burgundy wines such as Domaine de la Romanée-Conti. Outside France, there is a market for some of Italy’s Super Tuscans, such as Ornellaia, and the best Napa Valley wines from California, including Screaming Eagle and Opus One.
“Everybody wants the top Burgundies, the top Bordeaux, so it’s silly not to treat them as the cornerstone of your collection,” says Hon.
Buy as close to the source as possible
Building a serious collection is a lifetime’s work, so there is little point in paying for more expensive, mature wines. Buy as young as possible and hold it.
“In Bordeaux, for example, the cheapest point you can get into any vintage is to buy wine futures from registered agents,” says Hon. “But you have to find the reputable ones that purchase directly from the chateaux.”
This is generally the opening price for a wine and the value will only appreciate from here—as long as you followed the first rule. “If you can get top wines at this stage, the financial risk is very low,” says Hon.
Consider unusual formats
Wine can be sold in half bottles, bottles, magnums, double magnums, jeroboams and in several other even larger sizes. As most of the market is bottled in the standard 750ml format, there can be significant rarity value in the other sizes. When you buy wine futures, you will have the option of choosing the format, so it is worth considering some rarer bottle types.
Store it properly
A lot of new collectors like to buy from auction houses, but a lot of wine on the open market has travelled back and forth around the world, being exposed to changing temperatures and humidity. Your wine will be more valuable if you buy directly from a chateau and store it in a bonded, climate-controlled warehouse that is not too far from the original source of production. Geneva is a popular choice for European wines.
“This means that when you come to sell, you can show all the certificates and the exact provenance,” says Hon. “People will pay a premium for that.”
You can never know too much about wine. Study about it, take courses, and taste as many of the finest vintages that you can get your hands on. And if you want to be adventurous, says Hon, you can buy land in Burgundy and rent it out to a producer who will pay you in wine.
…But not too serious
It’s important to find enjoyment in the wine. “You’ve got to love wine to invest in it successfully,” says Hon. “It’s a lifestyle thing as well as an investment.”
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