Speculation or Diversification? The Truth about Funds that invest in Fine Wine

(This editorial is the executive summary of an exclusive VitaBella report)(More wine news on www.vitabella.fr). According to the newly released monthly poll BofA Merrill Lynch, investors mark their preference for liquidities and are overall slightly positive on the stock Market. They do not all agree about the direction the economic situation will take for the next few months but are all very skeptical about a strong and fast recovery scenario. Some even mention a a double dip recession. But at the same time, these fund managers also need to find new opportunities to invest their money in some ways including bonds, gold, etc. And wine is sometimes a "liquid asset" in which funds are interested to invest. And then come discussions among wine merchants and wine lovers who feel threatened by this new money coming into the luxury wine business and more particularly into Bordeaux 1st growths and the recent 2009' En primeurs' campaign. The same topics come back: Does it create a bubble that will explode sooner or later? What will happen when these wines will come back into the market on wine auctions? Do you know in which wines do these funds invest?

It is not breaking news to say that Finance and fine wines are strongly related. But as the word of Finance is often related for many to speculation and short-term objectives, wine merchants and wine lovers may be scared by the new flow of cash coming into the luxury wine business. As it may appear vague for some of us and in order to illustrate the comments made here, the reader will find, at the end of this article, a part of a portfolio that invested in wines as an example. It is just a portion of the entire wine holdings in this portfolio but informations such as names, vintages and valuations (recorded by the fund at the end of December 2009) could be found.

Some points to reassure wine merchants and wine lovers:

- Funds disclose their information to the public. So, nothing is hidden, and wine lovers can find out which fund invested in what wine. It is just a question of taking time to make researches.
- Investment funds are looking for new "safe" investments during a troubled economy. Wine seems to be the right vehicle as the track record for top wines has been quite impressive over the last 20 years. Moreover, they are actually interested in "concrete" assets such as gold, top quality properties and fine wine is considered "Red gold" by some.
- Investment funds are not overinvesting in wines but only take a very small part of their portfolio to invest in luxury wines. Asset allocation is strictly measured in order to lower the overall risk taken by the fund. So either a fund is 100% wine oriented or only a very small percentage is allocated to fine wines.
- Wine is such a beautiful thing that if investors do not make money out of this investment over the next 10 years, they will have the great pleasure to enjoy these bottles with their beloved friends.(Some funds propose to pay back the money invested by individuals with bottles instead of cash).

Of course, some negative points could be discussed:

- Investment funds can be huge and just investing a very small portion of their assets is already a lot of money.
- If investment funds all share the same traditional investment approach called "flight to quality", their investments would be only focused on the top 1% of the wines produced in the world (1% is an approximation as it may certainly be much lower than that).
- Much bigger than investment funds, Pension funds could have a big impact on prices of some very well identified names if they decide to invest heavily.
(More wine news on www.vitabella.fr).

List below: As an example, here is a portion of a portfolio that invested in wines (valuations at end of december 2009) and which recently made its holdings public.

Wine/ Producer/ Year/ Format /Nb.bott. /Tot. val.EUR

France
Bordeaux

Ausone/ Ausone/ 1961/ (MG)/ 6/ 17,137.50
Ausone/ Ausone/ 1964/ (BT)/ 12/ 5,256
Ausone/ Ausone/ 2000/ (BT)/ 2/ 3,544.50
Ausone/ Ausone/ 2003/ (BT)/ 3/ 4,610
Ausone/ Ausone/ 2005/ (BT)/ 171/ 361,551
Ausone/ Ausone/ 2006/ (En-Pr)/ 21/ 21,115.50
Ausone/ Ausone/ 2006/ (MG)/ 6/ 16,600
Ausone/ Ausone/ 2007/ (BT)/ 6/ 3,546
Ausone/ Ausone/ 2007/ (MG)/ 3/ 4,110
Ausone/ Ausone/ 2007/ (En-Pr)/ 36/ 21,276
Ausone/ Ausone/ 2008/ (En-Pr)/ 30/ 25,050
Caisse Prestige Bordeaux 1°/ Caisse Prestige/ 1998/ (CW)/ 1/ 8,500
Calon Ségur/ Calon-Ségur/ 1945/ (BT)/ 2/ 1,192
Calon Ségur/ Calon-Ségur/ 1949/ (BT)/ 20/ 13,560
Carruades de Lafite/ Lafite-Rothschild/ 2005/ (BT)/ 24/ 4,284
Carruades de Lafite/ Lafite-Rothschild/ 2007/ (En-Pr)/ 360/ 45,360
Carruades de Lafite/ Lafite-Rothschild/ 2007/ (En-Pr)/ 12/ 3,024
Carruades de Lafite/ Lafite-Rothschild/ 2008 (En-Pr)/ 1200/ 152,400
Cheval Blanc/ Cheval Blanc/ 1947/ (BT)/ 1/ 5,497
Cheval Blanc/ Cheval Blanc/ 1948/ (BT)/ 4 7,372
Cheval Blanc/ Cheval Blanc/ 1961/ (BT)/ 1 1,351
Cheval Blanc/ Cheval Blanc/ 1982/ (BT)/ 30 24,480
Cheval Blanc/ Cheval Blanc/ 1990/ (HB)/ 12 5,484
Cheval Blanc/ Cheval Blanc/ 2000/ (BT)/ 61 59,627.50
Cheval Blanc/ Cheval Blanc/ 2000/ (DMG)/ 1 3,578.50
Cheval Blanc/ Cheval Blanc/ 2005/ (BT)/ 7 4,726.75
Cheval Blanc/ Cheval Blanc/ 2006/ (En-Pr)/ 36 23,220
Cheval Blanc/ Cheval Blanc/ 2006/ (BT)/ 120 77,400
Cheval Blanc/ Cheval Blanc/ 2007/ (En-Pr)/ 72 31,464
Haut Brion/ Haut-Brion/ 1949/ (BT)/ 6/ 9,342
Haut Brion/ Haut-Brion/ 1952/ (BT)/ 8/ 5,088
Haut Brion/ Haut-Brion/ 1953/ (BT)/ 6/ 5,766
Haut Brion/ Haut-Brion/ 1964/ (MG)/ 3/ 1,817
Haut Brion/ Haut-Brion/ 1989/ (BT)/ 8/ 8,432
Haut Brion/ Haut-Brion/ 2000/ (BT)/ 12/ 6,188
Haut Brion/ Haut-Brion/ 2005/ (BT)/ 4/ 2,286.67
Haut Brion/ Haut-Brion/ 2006/ (BT)/ 48/ 27,264
Haut Brion/ Haut-Brion/ 2006/ (En-Pr)/ 12/ 6,816
Pétrus/ Petrus/ 1948/ (BT) /1/ 3,923.50
Pétrus/ Petrus/ 1961/ (DMG)/ 2/ 160,043
Pétrus/ Petrus/ 1961/ (MG)/ 1/ 18,395.67
Pétrus/ Petrus/ 1970/ (MG) /1/ 3,547
Pétrus/ Petrus/ 1971/ (BT)/ 4/ 6,717.33
Pétrus/ Petrus/ 1978/ (BT)/ 8/ 7,244
Pétrus/ Petrus/ 1982/ (BT)/ 1/ 4,658.50
Pétrus/ Petrus/ 1982/ (IMP)/ 1/ 60,000
Pétrus/ Petrus/ 1982/ (MG)/ 3/ 26,475
Pétrus/ Petrus/ 1983/ (BT)/ 14/ 13,699
Pétrus/ Petrus/ 1986/ (BT)/ 1/ 1,343.50
Pétrus/ Petrus/ 1989/ (MG)/ 1/ 6,963.50
Pétrus/ Petrus/ 1990/ (BT)/ 12/ 41,994
Pétrus/ Petrus/ 1995/ (BT)/ 5/ 6,166.25
Pétrus/ Petrus/ 1995/ (BT)/ 12/ 14,799
Pétrus/ Petrus/ 1998/ (BT)/ 11/ 26,826.25
Pétrus/ Petrus/ 1998/ (DMG)/ 1/ 17,000
Pétrus/ Petrus/ 2000/ (BT)/ 8/ 26,126
Pétrus/ Petrus/ 2000/ (MG)/ 1/ 7,211.50
Pétrus/ Petrus/ 2005/ (BT)/ 19/ 67,570.33
Pétrus/ Petrus/ 2005/ (MG)/ 1/ 10,117
Pétrus/ Petrus/ 2005/ (BT)/ 6/ 21,338
Pétrus/ Petrus/ 2006/ (En-Pr)/ 12/ 23,004
Yquem/ Yquem/ 1900/ (BT)/ 1/ 5,245
Yquem/ Yquem/ 1921 (BT) 13 102,730.33
Yquem/ Yquem/ 1937 (BT) 1 3,175.50
Yquem/ Yquem/ 1938 (BT) 1 1,171
Yquem/ Yquem/ 1945 (BT) 2 5,994
Yquem/ Yquem 1959 (BT) 1 1,593.25
Yquem/ Yquem 1966 (BT) 2 689
Yquem/ Yquem 1967 (BT) 46 59,581.50
Yquem Yquem 1967 (MG) 2 7,600
Yquem Yquem 1983 (BT) 6 2,506
Yquem Yquem 1996 (BT) 120 31,240
Yquem Yquem 1996 (HB) 240 26,040
Yquem Yquem 1996 (IMP) 4 8,060
Yquem Yquem 1996 (MG) 24 17,988
Yquem Yquem 1997 (BT) 96 32,352
Yquem Yquem 1997 (HB) 240 46,560
Yquem Yquem 1997 (IMP) 6 15,346
Yquem Yquem 1997 (MG) 48 29,688
Yquem Yquem 2000 (BT) 12 5,202
Yquem Yquem 2001 (BT) 1 468
Yquem Yquem 2005 (BT) 28 17,220
Yquem Yquem 2006 (En-Pr) 12 6,036
Yquem Yquem 2007 (En-Pr) 180 105,600

Burgundy

Bâtard Montrachet/ Leflaive/ 2000/ (BT)/ 12/ 3,312
Bienvenues-Bâtard-Montrachet/ Leflaive/ 1999/ (BT)/ 12/ 2,076
Bonnes Mares Grand Cru/ Comte de Vogue/ 2005/ (BT)/ 6/ 3,912
Chambertin/ Leroy/ 1996/ (BT)/ 6/ 9,684
Chambertin/ Armand Rousseau/ 1990/ (BT)/ 2/ 2,242
Chambertin/ Armand Rousseau/ 2003/ (BT)/ 3/ 1,212
Chambertin/ Armand Rousseau/ 2005/ (BT)/ 18/ 15,705
Chambertin Armand Rousseau 2005 (MG) 1 3,187
Chambertin Clos de Bèze/ Armand Rousseau/ 1999/ (BT)/ 5/ 2,762.50
Chambertin Clos de Bèze/ Armand Rousseau/ 1999/ (MG)/ 1/ 1,105
Chambertin Clos de Bèze/ Armand Rousseau/ 2005/ (BT)/ 12/ 12,868
Clos de la Roche/ Ponsot/ 2005/ (BT)/ 6/ 5,432
Corton Charlemagne/ Coche-Dury/ 1990/ (BT)/ 12/ 30,912
Corton Charlemagne/ Coche-Dury/ 1997/ (BT)/ 5/ 5,075
Corton Charlemagne/ Coche-Dury/ 1998/ (BT)/ 3/ 2,494.50
Corton Charlemagne/ Coche-Dury/ 1999/ (BT)/ 1/ 2,205
Corton Charlemagne/ Coche-Dury/ 2003/ (BT)/ 2/ 1,544
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2GE / 2E) DRC 1990 (CW) 2 66,641.33
DRC (Assortment) (1RC / 3LT / 2R / 3RSV / 1GE / 2E) DRC 1993 (CW) 1 11,300
DRC (Assortment) (1RC / 3LT / 2R / 1RSV / 2GE / 3E) DRC 1996 (CW) 1 15,348.25
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 1GE / 3E) DRC 1997 (CW) 1 13,450
DRC (Assortment) (1RC / 3LT / 2R / 3RSV / 1 GE / 2E) DRC 1998 (CW) 3 37,800
DRC (Assortment) (1RC / 3LT / 2R / 4RSV / 2E) DRC 1998 (CW) 1 12,600
DRC (Assortment) (1RC / 2LT / 3R / 2RSV / 2GE / 2E) DRC 1999 (CW) 1 33,250
DRC (Assortment) (1RC / 3LT / 1R / 3RSV / 2G3 / 2E) DRC 1999 (CW) 1 33,250
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2GE / 2E) DRC 1999 (CW) 4 133,000
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 1GE / 2E) DRC 2000 (CW) 1 14,610
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2GE / 2E) DRC 2000 (CW) 2 29,220
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2GE / 2E) DRC 2001 (CW) 5 68,965
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2GE / 2E) DRC 2002 (CW) 2 28,818
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2GE / 2E) DRC 2003 (CW) 2 37,681
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2GE / 2E) DRC 2004 (CW) 4 88,000
DRC (Assortment) (1RC / 2LT / 3R / 2RSV / 2GE / 2E) DRC 2004 (CW) 2 44,000
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2 GE / 2E) DRC 2005 (CW) 4 111,980
DRC (Assortment) (1RC / 3LT / 2R / 2RSV / 2GE / 2E) DRC 2006 (CW) 15 219,420
DRC (Assortment) (1RC / 3LT / 2R / 3RSV / 1GE / 2E) DRC 2006 (CW) 1 14,628
DRC (Assortment) (1RC / 3LT / 2R / 4RSV / 2E) DRC 2006 (CW) 1 14,628
Echézeaux/ Henri Jayer/ 1978/ (BT)/ 3/ 17,502
Echézeaux/ Henri Jayer 1978 (MG) 1 12,971.25
Echézeaux/ Henri Jayer 1980 (BT) 1 2,288
Echézeaux/ Henri Jayer 1984 (BT) 2 3,896
Echézeaux/ Henri Jayer 1985 (BT) 12 68,052
Echézeaux/ Henri Jayer 1986 (BT) 3 7,405.50
Echézeaux/ Henri Jayer 1987 (BT) 3 7,125
Echézeaux/ Henri Jayer 1988 (BT) 28 61,600
Echézeaux/ Henri Jayer 1989 (BT) 22 58,190
Echézeaux/ Henri Jayer 1989 (MG) 1 7,935
Echézeaux/ Henri Jayer 1990 (MG) 1 8,791.50
Echézeaux/ Henri Jayer 1991 (BT) 18 44,469
Echézeaux/ Henri Jayer 1992 (BT) 9 13,536
Echézeaux/ Henri Jayer 1993 (BT) 12 26,748
Echézeaux/ Henri Jayer 1994 (BT) 12 15,528
Echézeaux/ Henri Jayer 1995 (BT) 3 7,081.50
Echézeaux/ Henri Jayer 2001 (BT) 13 17,563
Griottes Chambertin/ Claude Dugat/ 1990/ (BT)/ 3/ 4,966.50
Griottes Chambertin/ Ponsot/ 2005/ (BT)/ 3/ 1,180.50
La Romanée/ Leroy/ 1962/ (BT)/ 12/ 20,172
Montrachet/ Comte Lafon/ 1992/ (BT)/ 2/ 3,494
Montrachet/ Comte Lafon/ 1993/ (BT)/ 1/ 1,250.50
Montrachet/ Comte Lafon/ 2003/ (BT)/ 1/ 745
Montrachet/ Comte Lafon/ 2005/ (BT)/ 12/ 19,692
Montrachet/ DRC 1968 (BT) 2 6,000
Montrachet/ DRC 1969 (BT) 3 6,816
Montrachet/ DRC 1973 (BT) 13 64,389
Montrachet/ DRC 1976 (BT) 2 7,573
Montrachet/ DRC 1978 (BT) 4 30,480
Montrachet/ DRC 1982 (MG) 1 9,000
Montrachet/ DRC 1988 (BT) 1 2,545
Montrachet/ DRC 1989 (BT) 7 23,863
Montrachet/ DRC 1990 (BT) 1 2,500
Montrachet/ DRC 1991 (JERO) 1 14,127
Montrachet/ DRC 1996 (MTH) 1 35,307
Montrachet/ DRC 1997 (BT) 5 10,133.33
Montrachet/ DRC 1999 (BT) 3 5,635.50
Montrachet/ DRC 1999 (MG) 1 4,191
Montrachet/ DRC 2000 (BT) 2 4,520
Montrachet/ DRC 2001 (BT) 1 2,258.67
Montrachet/ DRC 2002 (BT) 1 2,645
Montrachet/ DRC 2003 (BT) 2 6,151
Montrachet/ DRC 2003 (JERO) 1 11,100
Montrachet/ DRC 2003 (MG) 3 18,165
Montrachet/ DRC 2004 (BT) 6 13,881
Montrachet/ DRC 2004 (MG) 1 5,783.75
Montrachet/ DRC 2005 (BT) 37 173,604
Montrachet/ DRC 2006 (BT) 3 5,899.50
Montrachet/ Leflaive 1998 (BT) 3 7,161
Montrachet/ Leflaive 2003 (BT) 1 1,500
Montrachet/ Leroy 1969 (BT) 9 11,322
Montrachet/ Ramonet 1990 (MG) 1 4,250.67
Montrachet/ Sauzet 2003 (BT) 1 287
Musigny Grand Cru/ Comte de Vogue 2005 (BT) 6 5,229
Vosne Romanée/ Cros Parantoux Henri Jayer 1980 (BT) 15 62,250
Vosne Romanée/ Cros Parantoux Henri Jayer 1988 (BT) 1 3,757.50
Vosne Romanée/ Cros Parantoux Henri Jayer 1988 (MG) 1 9,393.75
Vosne Romanée/ Cros Parantoux Henri Jayer 1989 (BT) 2 10,273
Vosne Romanée/ Cros Parantoux Henri Jayer 1990 (BT) 1 7,834
Vosne Romanée/ Cros Parantoux Henri Jayer 1990 (MG) 5 71,457.50
Vosne Romanée/ Cros Parantoux Henri Jayer 1993 (MG) 2 15,009.50
Vosne Romanée/ Cros Parantoux Henri Jayer 1994 (BT) 2 3,354
Vosne Romanée/ Cros Parantoux Henri Jayer 1996 (BT) 13 43,368
Vosne Romanée/ Cros Parantoux Henri Jayer 1997 (BT) 8 14,628
Vosne-Romanée/ Henri Jayer 1992 (BT) 2 2,329
Vosne-Romanée/ Henri Jayer 1993 (BT) 2 2,355

Champagne

Clos d'Ambonnay/ Krug/ 1996/ (BT)/ 12/ 23,598
Clos du Mesnil/ Krug/ 1996/ (MG)/ 1/ 2,017
Cristal/ Roederer/ 1990/ (BT)/ 24/ 7,712
Cristal/ Roederer/ 1990/ (MG)/ 1/ 1,438.50
Dom Perignon/ Moet & Chandon/ 1964/ (MG)/ 4/ 5,020
Dom Pérignon/ OEnothèque Dom Perignon/ 1959/ (BT)/ 2/ 4,000

Rhone

Chateauneuf du Pape/ Réserve des Célestins/ Henri Bonneau/ 1978/ (BT)/ 10/ 9,100
Hermitage La Chapelle/ Jaboulet/ 1961/ (BT)/ 2/ 18,693
Hermitage Rouge/ Chave/ 1990/ (BT)/ 2/ 1,094
Hermitage Rouge/ Chave/ 1999/ (BT)/ 3/ 664.50
Hommage à Jacques Perrin/ Beaucastel/ 1999/ (BT)/ 10/ 2,640

Italy

Piedmont

Barolo Brunate R. Voerzio/ Roberto Voerzio/ 1998/ (BT)/ 24/ 2,724
Barolo Cannubi Sandrone/ Sandrone/ 1998/ (BT)/ 108/ 12,636
Barolo Cerequio R. Voerzio/ Roberto Voerzio/ 1998/ (BT)/ 54/ 5,724
Barolo Ciabot Ginestra D. Clerico/ Domenico Clerico/ 1998/ (BT)/ 18/ 1,971
Barolo Gran Bussia A.Conterno/ Aldo Conterno/ 1996/ (BT)/ 54/ 6,750
Barolo La Serra R. Voerzio/ Roberto Voerzio/ 1998/ (BT)/ 18/ 1,728
Barolo Le Vigne Sandrone/ Sandrone/ 1998/ (BT)/ 108/ 17,010
Barolo Rocche Annunziata Ris./ Scavino/ 1996/ (BT)/ 300/ 39,600
Barolo Rocche Annunziata Ris./Scavino/ 1997/ (BT)/ 300/ 68,400
Barolo Rocche Annunziata Ris./Scavino/ 1998/ (BT)/ 300/ 33,300
Gaja Sperss/ Gaja/ 1990/ (BT)/ 6/ 954
Gaja Sperss/ Gaja/ 1997/ (BT)/ 60/ 16,650
Massetto/ Tenuta dell'Ornellaia/ 1990/ (MG)/ 1/ 1,437.50
Massetto/ Tenuta dell'Ornellaia/ 1992/ (MG)/ 1/ 575
Massetto/ Tenuta dell'Ornellaia/ 1995/ (DMG)/ 1/ 1,604
Massetto/ Tenuta dell'Ornellaia/ 2004/ (BT)/ 36/ 14,364
Massetto/ Tenuta dell'Ornellaia/ 2004/ (DMG)/ 3/ 6,417
Massetto/ Tenuta dell'Ornellaia/ 2004/ (MG)/ 1/ 1,128
Ornellaia Edition Special 20 ans/ Tenuta dell'Omellaia/ 2005/ (DMG)/ 1 932
Ornellaia Edition Special 20 ans/ Tenuta dell'Omellaia/ 2005/ (MG)/ 2 633
Sassicaia/ Tenuta San Guido/ 1970/ (BT)/ 2/ 2,398
Sassicaia/ Tenuta San Guido/ 1985/ (BT)/ 6/ 8,946
Sassicaia/ Tenuta San Guido/ 1985/ (MG)/ 8/ 34,589.33
Sassicaia/ Tenuta San Guido/ 1990/ (MG)/ 3/ 4,497

Spain

L'Ermita Alvaro Palacios/ Alvaro Palacios/ 1996/ (JERO)/ 1/ 1,391.50
Vega Sicilia Unico/ Vega Sicilia/ 1962/ (BT)/ 12/ 6,268
Vega Sicilia Unico/ Vega Sicilia/ 1970/ (BT)/ 12/ 6,366
Vega Sicilia Unico/ Vega Sicilia/ 1970/ (MG)/ 1/ 1,583.33

United States

Cabernet Sauvignon/ Caymus/ 1995/ (MG)/ 2/ 976.89