Value of wine investment questioned

A recent report published by the International Monetary Fund (IMF) suggests that fine wines do not offer much more diversification for an investor than oil.

The IMF noted, however, that there were some strong correlations between emerging markets – such as China – and established ones, with demand for a commodity having a subsequent effect on pricing.

Investment in fine wine has increased significantly in recent years, due in part to the belief that it diversifies the risk of holding traditional commodities, such as oil.

However, the report has prompted many critics to question fine wine’s value as a portfolio diversification tool.

In their research paper, “A Barrel of Oil or a Bottle of Wine: How Do Global Growth Dynamics Affect Commodity Prices?”, IMF economists Serhan Cevik and Tahsin Saadi Sedik concluded: “Our results suggest that although fine wine can be considered as an investable asset, its behaviour is not significantly different than other commodities and therefore may fail to enhance portfolio diversification.”  

The report investigated the influence of advanced and emerging market economies on commodity prices by analysing the two different commodities – fine wine and oil – and assessing the impact of global supply and demand.

While investigating the broader commodities market, the economists discovered that the behaviour of oil and fine wine prices “has shown remarkable similarity”.

Specialist fund managers, Wine Asset Managers, disagreed with the findings, saying: “We believe they have found nothing more than a coincidence and that the fundamentals driving oil and wine prices are not closely linked at all.

"Wine investment has its own set of unique fundamentals and we believe it really does offer efficient diversification.”

Laura Pullman, 20.01.2011