TL;DR: I threatened a critique comparison of a “wine investment” website pitch v Winebouse as a PSA for those who made more constructive use of their professional lives than a career in finance like me. So here is the post that literally no one asked for:
I have to mention that I am not a client or an investor in any companies mentioned below. My critiques are not a recommendation or solicitation to buy or sell wine nor to do business (or not) with anyone mentioned. I am not attempting to impugn the honesty of the wine investment space nor will I speculate on what would happen to them if they were under the jurisdiction of the CFTC for more than a millisecond. All I am trying to do is provide non-finance geeks some basic questions you should be asking, and not just about wine investments, in accessible and non jargon terms.
With throat now cleared, let’s look at Vinovest: the page of principals shows exactly one financial person out of 17 — and his main experience is listed as being biz dev in China for Silicon Valley Bank(!!!???!!!). SVB doesn’t disqualify you (heck, I worked for Drexel, Lehman, and Bear Stearns!) but a little more depth for an investment service might be in order. Also, that single individual is listed as “finance advisor” — I do not see anyone listed as CFO (!?) - really, for an investment service, one that is going to need capital to store your investments? The company overall is heavy with tech entrepreneur goons and some wine people with some backgrounds that could at least be looked into, but could also be the usual trick of short term employment in a couple of famous names for resume padding. The board of advisors is adequate; the company seems real.
Next, I will excerpt their pitch: “Why Wine” [as an investment]. Here’s the page:
The page starts with a chart and a claim that wine has outperformed global equities by 1.88% annually over the last 15 years. The chart has lovely swishes that do not look like any asset price chart I’ve ever seen and the indices are listed as “GEI” v “Wine”. Nowhere are these specified. Is it S&P global v Live-Ex? MSCI v your best recollection? Don’t know.
Things really get interesting with the next section, “Wine performance explained”. Three explanations offered: scarcity, aging, and brand equity. Scarcity is the most compelling of these, although the claim that scarcity drives prices up even more over time as the wines are consumed is likely true only for older bottles where provenance comes into play, in markets so minuscule and illiquid that calling them “investments” raises other questions. Aging as a reason to invest in wines — well, no discussion of storage/carry charges here. Also, aging will eventually bite you on the ass unless you are investing 100% in pre-2010 Faiveley 
) Brand equity as a driver of laminar price increases over time — you’ve got to be kidding me. Store of value argument, maybe (To translate: famous wines are going to be expensive , and they will probably stay expensive, however, just because a wine is expensive today does not mean it will be even more expensive tomorrow). Finally, the site points out that some wines by the likes of DRC command 6 digit prices. True enough if we are speaking of cases, but you, Mr Small Retail Investor with your minimum investment of less than $2000, are not getting a piece of that through a service that is not offering you an index, but actual wines in custody. Taken in totality, this whole section exhibits very little understanding of finance, investing, or asset markets.
Moving on: the next section purports to show wine market correlation to other markets. Here I start to get a little pissed off: the chart compares wine (now here it IS Live-Ex) v 4 highly correlated equity indices. Where are the alternative commodity indices, where is the bond index? The chart here is misleading.
There’s a section about ancillary services and benefits that are irrelevant to investing. We’ll skip ahead to the section “Benefits of Wine Investing”. The opener is a gem which I can’t resist excerpting:
Inflation-Resistant
Inflation can make your groceries, gas, and rent more expensive. However, it has little effect on fine wine, making it the perfect antidote to rising prices
W.t.F. First of all, not true. If it were true, it would imply that you will suffer losses in real terms as your cost of living rises but your wine investment value doesn’t keep pace. This line is simply idiotic.
The next claim is that wine is recession resistant, and the evidence cited is the relative outperformance of wine to equities ….during an unspecified time period within the Covid years. COVID was unique in terms of prices and is NOT representative of wine price behavior in recessions!
Next claim:
Low Volatility
Fine wine has bond-like stability. You can expect consistent performance even when the stock market takes investors for a roller coaster ride
Not proven. They seem to be confusing low volatility with infrequent price discovery (meaning, you don’t experience the fluctuations in the value of, for example, your house because it isn’t up for sale on an exchange every minute, whereas you can see changes in the price of a stock you own every second, and that can drive amateurs crazy). This phenomenon in no way means that your house price is not oscillating more wildly than equities from month to month, and it probably is.
Direct Ownership
You only own stocks and bonds on paper. At Vinovest, you own every wine in your portfolio 100%. You can buy, sell, or drink at your choosing.
While not literally untrue, this statement made my head explode. Are they claiming wine as a physical commodity is a safer investment than a paper asset with a sound custodian? Are they claiming that I do not own my paper assets 100%?
I should invest in cheese. It ages well, I own 100% of the physical cheese in my fridge, and it goes well with my wine investment.
Tax Advantages
Our bonded warehouses don’t charge an excise duty and a value-added tax (VAT). That way, we can pass significant tax advantages to our clients.
No you don’t. Sooner or later someone will want to drink the wine and then VAT or excise will be paid. This isn’t a service, it’s a market segmentation that is convenient for many buyers and sellers, one that lives in a legal gray area and one that is standard practice for most London merchants at least.
The final claim is a diversification benefit that is asserted, unproven, and dubious.
Also, since clients create their own portfolios with the help of an advisor, how can a general claim of wine’s overall market outperformance be relevant for your particular portfolio ? You aren’t buying their index, even if it is true - you’re buying specific wines that may or may not perform anything like the index. If that were not true, you wouldn’t need an index in the first place, you could use a single representative wine as a benchmark.
Finally, beware of anyone who offers you a chance to get into an opportunity where they have unique positional advantages that they are now ready to offer you, discourages you from researching exactly where your money is going, and tells you they will “do all the hard and complicated stuff “. These guys don’t quite do that but….at times it gets close.
Again, I am not calling into question their motives. The pitch, however, raises serious questions that any investor should ask. It’s your money; be the a**hole you need to be.
This is already a ridiculously long post so I will compare and contrast Winebourse in a separate post
