Q2 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 Q2 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 12 years, Cult Wines has become the global leader in in wine asset management, providing analytically based, fine wine investment advice. Combining over 150-man years’ experience in the fine wine market, historical research and algorithm based modelling, our unique approach has driven our Assets Under Management (AUM) to £120 million. Our own CW index returned +6.26% in 2018 and +124.81% over 10 years (annualised returns of +8.75%).

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 their portfolio returns, diversify exposure and generate consistent capital appreciation.

This 2nd Quarter overview summarises the global financial and fine wine market performances to June 2019.

Quarter Two Market Overview

  • Liv-ex 100 was flat overall, while Liv-ex 1000 – the broadest measure of the fine wine market – edged up 0.47% in Q2.
  • Rhone 100 rose to the top performing region, returning 3.6% in Q2.
  • Both Burgundy 150 and Champagne 50 dropped by about 0.61% and 0.5%.
  • Bordeaux 500 closed the quarter 0.74% higher.
  • Rest of the World 50 picked up 0.54%, while California 50 gained 2.33%.

Quarter Two Trade Overview

Liv-ex 1000 – the broadest measure of the fine wine market – closed the quarter 0.47% up, reversing the downward trend starting from Q1, but failed to recover to its previous peak level in 2018. Demonstrating how the market is becoming more diversified, we noted that market activity of Champagne, Rhone and Italy has increased, while Burgundy trade share continued to decline this quarter.

Over the past decade, the fine wine market has broadened considerably, and has become more balanced across key producing regions, according to Liv-ex. This suggests that new opportunities are attracting investors who have traditionally not invested in regions other than Bordeaux, which still constitutes the backbone of most wine portfolios.

The beginning of the quarter saw Bordeaux trade share by value dropping from 62.2% to 55.3% and recovering 2% by the end of June. A broad-based surge in prices of the second wines of the First Growths also helped push the Bordeaux 500 index higher. For example, Petit Mouton has been among the top performers within the Bordeaux 500 index, gaining 6% on average across the recent ten vintages over one year. Meanwhile, Liv-Ex Fine wine 50, which tracks the Bordeaux First Growths performance improved marginally.

The Bordeaux En Primeur 18 campaign was the main driver of the Bordeaux market in Q2. It was a mixed campaign despite critics’ enthusiasm about the quality of the vintage. Pricing was not very consistent with some release prices offering some real value and some others hitting record high. For more details on Bordeaux EP 18, please see our Bordeaux En Primeur report.

Within Liv-ex 1000, the Rhone 100 index was the best performing sub-index in Q2, delivering an impressive return of +3.6%. The biggest contributors to this rise are the traditional brands of the region, such as Domaine Jean Louis Chave, Hermitage and Clos Papes and Beaucastel from Châteauneuf Du Pape. In particular, Beaucastel, Châteauneuf Du Pape 2009 rose by 15.2% so far this year.

In June, Domaine Jean Louis Chave, Hermitage 2006 vintage appreciated in value by 12.8%, followed by Clos Papes, Chateauneuf Du Pape 2011 (+10.6%). Guigal, Cote Rotie Ampuis 2007 continued to do well, up 8.8% by the end of June. Liv-ex’s Italy 100 ended the quarter 1% up, continuing on its strong trend. For more in depth analysis on Italy please read our Italy Investment Report.

Liv-ex’s Champagne 50 dropped out of the top 3 performing regions, dipping 0.5% during the second quarter of the year. Despite this performance decline, the region trade share jumped to an all-time high at the end of June, accounting for 19.3% of volume traded on the exchange. Louis Roederer Cristal 2006 and Salon Le Mesnil 2002 were among the most actively traded wines in the region.

Quarter Two Performance

Most wines from selected regions included into our CW portfolio have solid fundamentals and are well positioned to grow faster than the broader market. In the second quarter of the year, CW Bordeaux index returned +1.3%. CW Burgundy index gained 2.5%, contrasting with the fall in Liv-ex’s Burgundy 150 index.

Please be noted that CW’s Burgundy index has a diverse base containing more than 400 wines in the index, in comparison to Liv-ex Burgundy 150 index, which carries 40% in DRC.

ADespite the muted performance of the CW Italy index this quarter, some wines continue to steadily increase in both prices and popularity, triggered by much attention in the region such as Barolo and Barbaresco among investors. A special mention must go to Bruno Giacosa, Barolo Vigna Rocche Riserva (red label) 2004, which appreciated in value by 166 % over the last two years.

In Q2, CW Champagne index was down -15%. A few prominent Champagne producers such as Dom Perignon P2 and Louis Roederer, Cristal have stumbled in recent quarters as investors’ attention has gradually shifted to wine regions such as Italy and Rhone that are perceived to offer more value by some investors.

Within CW USA index, Napanook 2008 and Opus One 2005 were the top performing wines for this quarter, delivering an impressive return of +51.1%, and +43.8% for our investors. Overall, the CW US top 10 increased in value by an average of +35.7%.

CW’s ROW index, which captures the price movement of wines from other investable regions dropped 2.6% in Q2. However, it has delivered a healthy return of +18.62% over the last 3 years. In particular, returns in Rhone led gains in this index with Chapoutier, Ermitage Pavillon and Domaine Jean Louis Chave, Hermitage topping the performance table.

Download Cult Wines Quarterly Reports

 

Quarter Two Investment Overview 2019

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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

Download Cult Wines Quarter One 2018 Report