Fine wine acting ‘more like property’ than a collectible asset
Wine has moved away from being influenced by the same forces as collectibles such as whisky, watches, classic cars, art, and luxury handbags and its behaviour is more like that of property and private equity, a new report has claimed. db investigates.
The Q4 report by WineFi, the fine wine investment company backed and part-owned by Coterie Holdings, has shown a more positive picture for fine wine, arguing that the markets have finally bottomed out, with Champagne and Tuscany in particular seeing signs of “a sustained recovery”. However, WineFi’s CEO Callum Woodcock argued that the most intriguing aspect unveiled in the report is how fine wine as an asset has changed in the last 15 years, particularly as the macroeconomic drivers of fine wine prices have shifted over time.
The report noted that prior to 2011, fine wine – as represented by the Liv ex 1000 index – showed strong correlations with global equities, emerging-market growth, and credit conditions, behaving largely as a risk-on luxury consumption asset. however, this picture changed after 2011.
Woodcock argued that while collectibles are more tied to wealth – “as the world gets richer, they go up in popularity, and if there are economic shocks and economic uncertainty, they fall again”, by contrast, wine “appears to now look a lot more like residential property, so people do treat it like a risk asset, and it behaves in exactly that way.”
As the secondary market has matured, the price dynamics have become increasingly influenced by liquidity, interest rates and sterling exchange-rate movements, he said – much more linked to market forces, and the the supply of money and interest rates that influence it.
“The odd thing is that this isn’t new,” he told db. “The data that proves it goes back to 2011, which is 15 years of data. That’s not a short time horizon.”
He warned however that the revelation was likely “to irritate a lot of people within the wine trade… because it really flies in the face of the whole ‘wine isn’t an investment’ crowd.”
“It shows that wine can play a part of an investment portfolio beyond the way it is currently treated by the majority of market participants, which is that it’s the ‘fun part’ of your portfolio,” he said.
An anchored real asset
Digging into the data, Aaran Daniel, head of data and analytics at WineFi, explained that the post-2011 fine wine had been “evolving from a risk-on luxury asset to more of a UK-anchored real asset”.
He explained that whereas previously, it was driven by equities and emerging-market demand, “since 2011 wine has been driven more by liquidity, credit and currency movements.”
WineFi isn’t the first to suggest this idea, he noted – that accolade goes to Linda Jiao of the Department of Social and Human Sciences at the University of Bordeaux who looked at the economies of BRICS countries in an American Association of Wine Economists paper – but he argued that it is the first to link it specifically to UK factors.
Replicating Jiao’s approach using current data and additional UK macro variables (the key variables that are crucial for understanding and forecasting a specific economy), WineFi showed the trend had continued from 2011-2026.
“In this post-2011 regime, financialisation factors – M3 money supply [the broadest measure of the money supply], UK real effective exchange rate, UK interest rates and credit stress metrics like yield spread – have started to matter much more for explaining the month-on-month movements of the fine wine markets (as represented by the Liv-ex Fine Wine 1000),” Daniel said.
Why 2011?
Daniel argues that the Chinese gift giving crackdown in 2010 after the boom that drove prices upwards, and a high priced 2010 en primeur was “just a spark”, noting that wine funds, indices, and secondary-market liquidity matured in the late 2000s. Prices have become “increasingly sensitive to global liquidity conditions (money supply, interest rates, and risk appetite) rather than just factors like emerging-market growth or equity wealth effects”, he said.
Fine wine is not “an isolated asset class, but the key macroeconomic drivers of fine wine have changed and are changing,” Daniel said.
“Micro fine wine conditions are evidently stabilising but the macro side is more mixed. Falling interest rates and rising money supply support buoyancy but ‘Trump tariff’ uncertainty and a strengthening pound provide reasons for caution,” he wrote in the report. “Conditions like these present an opportune moment for selective buying, identifying wines with the potential to outperform their peers becomes all important.”
What does the data show?
Before 2011, fine wine moved with risk assets, Daniel continues. “The Liv-ex 100 showed meaningful correlations with equities and was highly sensitive to market stress, falling when volatility and credit spreads rose.”
Since then, however, those relationships have largely disappeared – the correlations with equities are now close to zero, he said, as are links to volatility. “Instead, fine wine prices are more closely tied to liquidity conditions, particularly money supply growth.”
As Daniel explains, this shift mirrors property and private equity markets, “where prices adjust slowly to changes in wealth and liquidity rather than monthly market sentiment”.
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Ultimately, more money coming into wine is good for the whole trade, Woodcock pointed out. “And I think what this shows is like this is happening, whether we like it or not, because people are reacting to market forces, the way that an actual asset would rather than a collectible.”
Do others agree?
Broadly-speaking partly. James Miles of Liv-ex commented that Wine-Fi’s research was very interesting, agreeing with a lot of its overall analysis. However, he pointed to the financial crisis of 2008 as the main key, as it was this event that triggered “some very weird monetary and fiscal conditions” and “slightly skewered this notion that assets were uncorrelated”.
“There were a lot of hedge funds and those sorts of things that were organized on this theory around correlated and uncorrelated assets, and how to balance a portfolio, and the financial crisis slightly revealed that as an emperor with no clothes, because it proved that in certain circumstances, everything is perfectly correlated,” he said.
“September 2008 is the key pre- and post- event. Before that you’ve got a much more normal economic environment where growth and wealth are the main stimulants of price change in fine wine. And post-2008 that you’ve got all these events which resulted in some very weird fiscal and monetary policy, which became the driver of the price of everything, including includes wine,” he explained.
Or even earlier?
Others would take the timing even further back than that. While agreeing with the key observations around the importance of the interest rate and credit environment, which had a been “a core part of the story over the last period”, Geraint Carter of Bordeaux Index argued that it is necessary to take “half a step backwards and ask ‘when did we enter a permissive investment environment?’”
The trends, he argued, were “much longer in the making”. “The answer is from the mid-1990s, with the international financial crisis, which was about excessively permissive capital markets in its heart,” he said.
Additionally, as wine is priced in sterling, whatever happens to Sterling is a big factor.
“We saw that most dramatically in 2016 post-Brexit, that rally, the biggest, solid two-year rally, was significantly a 15% depreciation in sterling that enabled a lot of buying elsewhere.”
As Miles agreed, fine wine priced in sterling started to look “incredibly attractive to European and dollar based buyers”. Covid, Covid,
Although “the world still feels completely mad”, the rise of interest rates, has seen monetary and fiscal policy return closer to where it has been historically, he said.
“My suspicion is that we will probably go back to an environment where growth and wealth are the main drivers, unless we get another sort of existential crisis and interest rate [that makes] monetary policy and fiscal policy goes nuts again.”
And while agreeing with much of the analysis, if not the timings, Carter isn’t convinced that fine wine can really be said to be an asset akin to property.
“There’s no income associated with wine like there is in property, it basically has a completely different liquidity profile which makes it a very different proposition for investors, especially institutions,” he said. “I think you have to be a bit careful in how far it reaches in drawing parallels.”
