Q1 2019 Investment Overview

Cult Wines Financial Overview and Quarterly Performance Summary

•  Global Markets Overview
•  Fine Wine Market Overview
•  Trade Overview
•  Cult Wines Performance
•  Market Outlook

 

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Cult Wines Q1 2019 Performance Introduction

Portfolio based investment grade wine is one of the most established alternative assets available to investors looking for tax-efficient, asset backed diversification and capital growth opportunities. Over 11 years, Cult Wines has become the global leader in providing analytically based, fine wine investment advice, both discretionally, and non-discretionally, utilising algorithmically based models across historic and projected data. This, combined with over 150-man years’ experience in the fine wine markets has driven our Asset Under Management (AUM) to £105 million. During 2018, our index returned 6.26% and since 2009 123.70%, annualised at 8.93%.

With low interest rates, inflation concerns, low returns from traditional financial assets and an uncertain economic outlook, many investors are looking at ways to enhance portfolio yield, diversify and gain consistent capital appreciation. This is the 1st quarterly overview summarising both the global financial and fine wine markets performance in 2019.

Quarter One Market Overview

  • Liv-ex 100 – the industry benchmark - dipped 0.2%, while the broader Liv-ex 1000 dropped 2.8%.
  • Bordeaux Legend 50 suffered the most with almost 6% quarterly loss.
  • In March, Burgundy 150 had seen its worst monthly performance in 15 months, losing 3.08%.
  • Champagne and Italy were the only two regions that ended the quarter on a positive note, rising 1.1% and 1.4% respectively.
  • Rest of the World fell 2.4%, while Rhone 100 dropped sharply and closed the quarter with 3.1% loss.

Quarter One Trade Overview

Q1 this year has seen Liv-ex 1000 – the broadest measure of the fine wine market – drop 2.8% in aggregate. Most of the sub-indices within Liv-ex 1000 made losses, with Bordeaux Legend 50 suffering the most and falling – 5.9% over the first quarter of 2019. Burgundy also cooled from its highest level of 2019, with Burgundy 150 index down 5.7% to 563 in Q1. Outside of Liv-ex 1000, the recently launched California 50 registered a 11% loss over the recent six-month period.

Despite the negative performance over the first quarter, varied performance across different regions provides additional insight. Liv-ex’s Italy 50 and Champagne 50 were at the top of the Liv-ex 1000 leader boards, up 1.4% and 1.1% respectively.

Specifically, following the February release of Sassicaia 2016, Italy has seen its trade share on Liv-ex improve significantly from last year this quarter and other Super Tuscan wines have come back into view after muted performance in 2018. Within Italy 50, Gaja and Masseto have been the top performers, while within Champagne 50, Salon Mesnil is the name that stands out, with its 2002 vintage delivering a strong return of + 8.3% in March.

In March, 2009 was the most-discussed and -traded vintage in Bordeaux, perhaps owing to the momentum effect that the 10-year revisit of Bordeaux 2009, which was carried out by various wine critics, had on the fine wine market. Most of the retrospective scores were released in late March, and a number of the wines under reassessment were confirmed as great and some were even granted a higher score because of the improvement in the bottle.

For example, wines such as Haut Brion 2009, Latour 2009, and Pavie 2009 remained the same at 100 points, while Pape Clement 2009 saw the greatest score improvement to 99 points (from 95 points ten years ago), based on The Wine Advocate scores. In March, other heavily traded vintages of Bordeaux were 2010, 2015 and 2016, accounting for 9% of Bordeaux trade share for each vintage.

The performance of fine wine market was largely driven by Bordeaux at the end of Q1, which saw its trading volume nearly up 8% of total value to 61% within a week, mostly thanks to increased market activity from Mouton Rothschild 2016, according to Liv-ex. Leoville Las Cases 2009 and Mouton Rothschild 2000 were also very active. Elsewhere beyond Bordeaux, US and Champagne also saw a number of wines increase in both price and liquidity.

Quarter One Performance

CW main index ended the quarter virtually flat with only 0.04 % gain. CW Champagne and CW ROW index led the gain over the first quarter of the year, with returns of +5.12% and +2.1 % respectively.

Champagne got off to a good start this year, returning +4.1% in March and +5.1% year-to-date. Contributing to the CW’s positive Champagne performance are Pol Roger, Taittinger and Krug: Krug jumped to 15th place in Liv-ex power 100 in 2018 and its Krug, Closnil 2000 returned +22.5% in Q1.

As the Bordeaux new 2018 vintage release dominated the headlines in April, the market quietened in terms of trading volume. However, Italy ended the quarter on a positive note, rising +2.13% YTD. As explained above, much of the rally in CW Italy in Q1 has been driven by the improved trading activity of famous Super-Tuscan producers, such as Masseto, Sassicaia and Tignanello. Major market movers of the CW Italy index were Gaja Barbaresco 2014 and Masseto 2006, up +48.2% and +37.7% respectively.

CW’s Rest of the World index gained +2.21%, and the major contributor to this quarter’s positive performance were Guigal, Cote Rotie Turque 2007 (+32.24% in Q1)) from Rhone and Penfolds, RWT Shiraz 2014 from Australia, rising 11% in Q1. At the same time in US, CW’s US index posted muted performance, registering + 0.21% returns.

CW Burgundy fell marginally in Q1, following last year’s strong performance as most wines from DRC dropped in price. Burgundy wine demand appears to be taking a pause, affected by concerns of slowdown in Asia and uncertainties related to the US-China trade dispute. Notably, Trapet Pere et Fils, Chambertin 2012 and Domaine Leroy, Savigny Beaune Narbantons 2013 have been the worst performers over the first quarter. However, Comte Liger Belair Vosne Romanee Clos Chateau 2004 rose 141% in Q1, offsetting some of the price losses coming from other big names of Burgundy.

(Please note that CW’s Burgundy index has a diverse base containing more than 400 wines, in comparison to Liv-ex’s Burgundy 150 index, which is 40% DRC-dominated.)

Despite more modest Burgundy performance in Q1, we remain optimistic as its market share continued to improve in Q1 (now at 18% of total traded volume on Liv-ex). As we have pointed out in past reports, the demand for Burgundy will continue to be supported by a number of factors, with the most important ones being tightly controlled distribution and scarcity. There are many Burgundy wines, which rose significantly despite a more challenging environment throughout Q1.

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Quarter One Investment Overview 2019

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Quarter Four Investment Overview 2018

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Quarter Three Investment Overview 2018

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Quarter Two Investment Overview 2018

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Quarter One Investment Overview 2018

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