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Wine of the times

Investing in wine has proved very profitable over the years. The main index recognised by the trade is the Liv-ex 100 Fine Wine Index. It was started in September 2004 and since then, this wine index has risen by 253 per cent.

It has fallen slightly over the last month or so but because the availability of fine wines is limited it is likely that it will soon resume its upward trend.

Both Christie’s and Sotheby’s have reported a marked increase in the volume of fine wine coming to auction, with the main buyers coming from Asia. Because vintage wines are a finite commodity, as the bottles are drunk, vintages become scarce, therefore, provided demand is maintained, prices will go up.

For the highest investment returns, it is best to stick to the major first or second-growth wines from the Bordeaux region of France. As well as these, Chateau D’Yquem, the French dessert wine, should also prove a good investment, as should the superior wines of Burgundy and the Rhone Valley.

One important point about investing in wine is that the sales are free of capital gains tax because the Inland Revenue classifies wine as a wasting chattel but the cost of storage and commission must be taken into account when calculating net returns.

For those investors wanting to invest substantial amounts into wine, one of the best funds is Wine Asset Managers LLP, which is authorised by the FSA. Minimum investment is 50,000. The fund is advised by Steven Spurrier, the renowned consultant editor of Decanter Magazine. The assets are held by custodian trustees.

The expected return over a five-year period should be 8-12 per cent a year net of costs. Despite the recession, I believe that this is a sensible way of spreading your risks.

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