Investing in Australian Wines: A Whole New World of Opportunity

Wine And Whisky

Investing in Australian Wines: A Whole New World of Opportunity

Australian wines have earned a solid reputation among wine connoisseurs for their quality and taste, and a growing number of investors are discovering the investment potential of these “New World” wines. David Bowden offers some insights on the Australian wine market and tells us which wines from “Down Under” investors should watch out for.

Written by David Bowden on 29 June 2017

Wine connoisseurs tend to fall into two camps – aficionados of “Old World” wines (primarily from European countries such as France, Italy, and Spain) and those with more faith in wines from the “New World” (from countries such as Australia, New Zealand, USA, Chile, Argentina and South Africa). Without delving deeply into the merits of both here, the investment dollar still favours Old World but, even then, maybe just 250 wines and mostly from the French wine regions of Bordeaux and Burgundy.

Historically, Australian wines are considered “new” despite having been produced there for over 200 years. They exploded onto the global wine stage in the 1970s, but for many old-school connoisseurs they were big, brash “fruit bombs” full of flavour, but perhaps lacking the finesse and sophistication of those from the Old World.

Over the years, Australian wines have grown in stature, quality, and diversity and helped open the door for other New World wines to emerge and take on those from the more established regions.

As the interest in Australian wines grew, connoisseurs recognised the potential of investing in numerous iconic wines from “Down Under.”

Tasting Room Wine Chapel Margaret River

Tasting Room Wine Chapel Margaret River

Direct Purchase or Investment Fund

While many will purchase investment wines directly from the winery, fine wine retailer or at auction, others opt to buy into a wine investment fund with other like-minded investors and wine aficionados.

There are several global wine investment funds including the International Wine Investment Fund based in Adelaide and the Wine Investment Fund (WIF), which requires a minimum investment of £10,000 (US$12,700).

These funds typically invest exclusively in Old World wines with the WIF – which reported a 152% increase in net asset value from 2004 to 2017 ­– only investing in what they describe as low risk investment grade wines exclusively from Bordeaux.

Several investment funds have come and gone and are not so common these days with direct purchase from a reputable wine distributor or auction house being the most recognised avenues.

In Australia, the Langton’s Classification of Australian Wines is considered the barometer for Australian investment-grade wines. Langton’s benchmarks and rates wines based upon market demand and the secondary (auction) market over time. It classifies wines as “Exceptional,” “Outstanding,” and “Excellent.”

In Langton’s inaugural classification in 1990, just 34 wines were included but in the latest classification of 2014, 139 were included (a minimum of ten vintages are required along with a track record for each wine at auction).

Investing in Australian Wines: A Whole New World of Opportunity

Pouring Penfolds Grange

Blue Chip Australian Wines

There are a handful of iconic Australian wines (Langton’s identifies just 21) with hefty price tags and big followings including:

  • Penfolds Grange (or Bin 95 and also known as Penfolds Grange Hermitage for vintages preceding 1989)
  • Henschke Hill of Grace
  • Rockford’s Basket Press Shiraz
  • Brokenwood Graveyard
  • Wendouree Shiraz
  • Torbreck RunRig
  • Chris Ringland Shiraz
  • Mount Mary Quintet
Freshly filled barrels Penfolds Magill

Freshly filled barrels Penfolds Magill

Other Australian wines with investment potential

There are many distinguished Australian estate wines bubbling beneath the surface; the “tech stocks” of the wine world that could just be the next best investment.
These include:

  • Noon Eclipse Grenache Blend
  • Jauma Ralphs Vineyards Clarendon Grenache
  • La Violetta La Ciornia Shiraz
  • Howard Park Abercrombie Cabernet
  • Wild Duck Creek Estate Springfield Shiraz
  • Parker Terra Rossa First Growth Cabernet Merlot
  • Katnook Estate Cabernet Sauvignon
  • Turkey Flat Shiraz
Darenberg wines in rack McLaren Vale

Darenberg wines in rack McLaren Vale

Proper Provenance 

It is imperative for investors to always purchase wines from reputable retailers or wine auction houses that can offer background information on the history of the wine (especially its provenance or how it was stored).

Merchants and auctioneers will typically take a commission for any purchase or sale as well as charge for storage plus maybe an annual management fee for looking after the portfolio.

Some reputable wine companies in Asia to seek advice from include Cult Wines in Hong Kong, Artisan Cellars in Singapore, and Wickens & Co in Hong Kong. Sotheby’s and Christie’s regularly conduct wine auctions in Hong Kong.

The Bottom Line

Fine wine has proven itself to be an attractive alternative asset, with a low correlation to financial markets and the potential to deliver high returns. The Knight Frank Fine Wine Icons Index recorded 24% growth last year, outperforming all other luxury investments including classic cars, art, and watches.

Those looking to invest in these “liquid assets” would be wise to explore Australian wines – which offer a whole new world of opportunity.

HOW TO INVEST IN FINE WINE

WEALTH has partnered with international wine experts Cult Wines, to bring you an Expert Guide on investing in the fine wine asset class.

In this guide you will learn about the wine supply and demand dynamics, how to value wine, and the risks associated with investing.

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