YES. An unspoken fact about fine wine is that it is largely a EUR asset. 80-90% of investible wines are produced in the Eurozone. However, the U.K. is the centre of the global wine trade with prices quoted in GBP. This anomaly is largely a result of the UK’s unique position in allowing an individual’s deferment of taxes for their stored collections (See previous article: [What Does In Bond Tax Status Mean?]).
Be wary of any investment analysis that does not account for foreign exchange. Price graphs of wine can show very strong returns and outperformance against other asset classes especially during times when markets sell off. However, they are misleading for the most part as these charts are shown in British Pounds. EUR appreciates against GBP in market downturns, making the optical fine wine outperformance largely an embedded foreign exchange gain. When the same charts are re-denominated into EUR, they don’t show such returns over the same period or outperformance in times of turmoil**.**
Brexit is great example of this phenomenon. GBP to EUR peaked in November 2015 around 1.420. It collapsed after Brexit, eventually finding a range of 1.10 to 1.20 (23% to 16% lower).
The enclosed chart is Liv-Ex’s Fine Wine 1000. From November 2015 to December 2016, the market rallied from 245 to 300, a gain of 22%, which is pretty much offset by the movement of GBP to EUR during the same period.
“The” global centre? A global centre perhaps. Maybe you could look at Hong Kong, whose currency is pegged to the US dollar and which is also a major wine hub.
I know it sounds like a strange comment to make but it is definitely THE global centre for wines. And the main reason is that global private collectors store the vast majority of their wines in the UK because the deferment of duty and vat (so called In Bond) and the provenance of the wine with the marketplaces means you get the best resale value and liquidity.
You may well be correct - I can’t immediately find data. But the reason HK is a wine hub is that there is no duty or sales tax or VAT on wine. It can be freely imported, stored and exported without any tax implications. There are a lot of large high-value wine storage facilities here.
And a lot of the larger HK merchants are… UK ones anyway - BBR, FRW, Farr, etc.
The lack of duty and VAT also causes a problem - there’s no concept of bonded storage, so provenance goes out the window. Wine fraud is far more of a concern.
You can ship and re-sell bottles easily frmo the UK into HK, but most merchants won’t take wines the other way.
We have a lot of clients (buyers and sellers) based in HK, the vast majority of them store the bulk of wines in the UK. Only when they are looking to ship for drinking, do they send those wines in HK.
I have lists of people trying to sell their wine in HK, i can even vouch for some of the provenance but there are not so many takers. Prices are below what you can buy in the UK and that is before costs of storage… demand from China has collapsed in the last couple years and there is a lot of wine swishing around HK looking for a home.
This is probably true - the half a million people who preferred not to live under direct Communist Party rule have left town and are already in the UK, Canada, USA, Australia, Taiwan etc.
HK isn’t subject to capital controls the same way china is. The currency is pegged to the USD so you don’t even need a foreign currency hedge, and people in HK can freely invest in international assets. The most popular banks are big international ones like HSBC, too…
