Hunting value in equity and wine

LONDON (Reuters) - Alan Brown, global investment chief at Schroders (SDR.L), tries to bring the rational thinking of his day job to his private enthusiasm for value plays in the world of wine.

The 53-year old, who oversees more than 100 billion pounds in assets at the London-based firm, likes to hunt down cheap but high quality vintages in much the same way as he plays the markets.

"I try to avoid stocks which are already on glamour ratings where they already have pretty high expectations built into their share price," Brown told Reuters.

"My instinct is to go for value stocks which have been neglected and the same principles apply to wine."

Running the numbers holds water for both, he said.

"An apparently difficult topic such as wine can be rationalised quite well. You don't have to necessarily be a wine buff with knowledge of every single chateaux, you can find a lot of it just from the data," he said.

Brown is directly responsible for equities and multi-asset portfolios at Schroders, as well as structured products, and also sets the group's overall investment policy.

Data from Thomson Reuters fund research firm Lipper show some of Schroders' core funds have suffered with the rest.

The more than 1 billion pound UK Alpha Plus and UK Mid 250 funds have closely followed average losses among their peers in the Lipper Global benchmarks over 12 months.

But the 830 million pound Income fund is second only in its Lipper Global benchmark to J O Hambro over the period.

So how do you get your cellar to outperform?

Brown enjoys an inexpensive bottle of Viognier with his curry, as much as a 1982 bottle of Romanee Conti -- the most expensive in his cellar. To generate returns, though, he says the finest Bordeaux and Burgundies are tough to beat.

PRICE LAG

He tips New World Pinot Noirs as a value investment, as well as wines from Chateaux Pichon Longueville in Bordeaux.

A 2001 South African Meerlust Rubicon which picked up an an international award now trades at three times its original price, he said.

"The real trick is to not just go and buy that obvious big brand; that very expensive wine." Prospective collectors should also consider the impact of storage and insurance costs, as well as a steep bid/offer spread which makes it necessary to hold wine for a long time before profiting, he said.

Brown was inspired by Princeton economist and wine buff Professor Orley Ashenfelter in his assessments of a wine's prospects.

The academic's econometric models show wine prices lag financial markets by about a year, but Brown is not convinced his collection is poised for a boost in 2010.

"We think there are reasons to be cautious and we will maintain this position until we get evidence later in the year that the recovery is going to be sustained," he said.

Despite that caution, Brown is building a large tasting room and temperature-controlled wine store for up to 5,000 bottles at the house in the Cotswolds he bought last year from British Olympic swimmer and TV pundit Sharron Davies.

"Davies used the outbuildings as a gym -- I think a wine store and tasting room are a much better use," he said.

Brown -- who was often found riding his pony and trap around the Berkshire countryside near his former home -- has been blending the worlds of wine and investments for most of a career which began at investment bank Morgan Grenfell in 1974.

And he says wine has one key advantage over other assets.

If the price falls, you can still drink it.

(Editing by Joel Dimmock and David Holmes)

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