An Update on Wine Investment By John Stimpfig

For most of this year, the wine investment market remained largely immune from the credit crunch. The Liv-ex 100 Index continued to rally and rise from January through till the early part of the autumn.

• Comments from Chris Low

After a small drop in September, the floodgates finally opened in October when the Index experienced its biggest ever monthly fall of 12%.

November also saw a further 5% drop with the result that the Index has lost over one fifth of its value since the summer.

Without question, the first and biggest casualties to date have been the blue chip 2005 clarets. Firstly, they had risen much faster than other vintages and many felt they were overvalued.

Plus they were the most liquid vintage on the market. So in the dash for cash it was perhaps little surprise that some are now trading at a significant discount to their June prices. Some are down by a third in value.

Since then other vintages have also been dragged down including the 2000s, 2003s, 2004s followed in November by more mature vintages such as the 1995s, 1990s and 1989s. The result is that the Liv-ex 100 Index is now down by 13% compared to the start of 2008. However, it is worth bearing in mind that the FTSE is still down by over 30% in the same period.

Where do prices go from here? Many wine investment professionals remain confident that the market fundamentals remain extremely sound despite this latest blip. Moreover many are tentatively predicting that the market will experience a rally in the first quarter of 2009.

One obvious reason for this is new availability of stock on the market and prices so low there are some very good deals to be picked up, particularly if you are buying UK stock in dollars or euros. Meanwhile many investors, including the major wine funds, believe that prices are about to or already have bottomed out now and that January and February will provide some un-missable opportunities to go back into the market.

However, the market could still be in for a bumpy ride, given the uncertainties of the broader economic landscape. Moreover, the fine wine market's position is unlikely to be eased by next year's (2009) Bordeaux en primeur campaign which is could be yet another very tough sell for all concerned.

The Top Ten Investment Brands
Which wines should you be focusing on for your investment portfolio? One simple and effective way of looking at this question is to consider which wines were most traded in 2008 on the Liv-ex Fine Wine Exchange. This global on-line exchange comprises more than 200 wine trade members and is a invaluable barometer of brand as well as demand and prices. So who were the most sought after labels last year?

As ever, Brand Bordeaux came top of the pile. And as ever, the usual First Growth suspects led the field, with all five Premier Crus coming top of the pile, just as they did in 1855. In 2008 though, Lafite was the leading performer in terms of trade by value. It accounted for an astonishing 17% of all trades on the exchange, five per cent ahead of its nearest rival, Chateau Latour. Moreover, when you factor in that its second wine, Carruades de Lafite, that total rises to more than one fifth.

Underlining Bordeaux's strength in depth is the fact that it takes nine of the top ten places in the Liv-ex League table, with only Burgundy's Domaine de la Romanee-Conti sneaking in at number 10.