Credit crunch fuels investor thirst for art, wine
LONDON (Reuters) - Rollercoaster markets may have cooled investor appetites for shares or property, but interest in offbeat investments is booming as a growing number of art and wine funds compete to combine passion with high returns.
Downturns typically mean a slowdown in investments that are seen as discretionary, but industry watchers say the credit crunch has left the appeal of so-called "investments of passion" -- art, wine and collectibles -- largely untarnished.
Instead, they say, it brought home the need for investors to take on uncorrelated assets to offset the ups and downs of the mainstream equity and credit markets.
Investing in a Picasso, a case of Chateau d'Yquem or a Bordeaux from the sought-after 1961 vintage is nothing new: wealthy enthusiasts have been filling their cellars and covering their dining-room walls for centuries.
But the specialized asset managers that have emerged in the past decade have brought sophisticated financial techniques to the pursuit, widening interest to include large institutional investors who are attracted by rising prices, and returns that can reach or exceed 20 to 40 percent a year.
In 2007, for example, the FTSE blue-chip index rose by less than 4 percent. The main index on Liv-ex, an independent trading and settlement platform for the fine wine trade, ended the year up just over 40 percent -- and with excitement still bubbling around the 2005 Bordeaux vintage, now being shipped.
"More and more people are looking at wine as an asset class, discovering it is uncorrelated to bonds and equities, that there are fund managers out there to help them capture those gains," said Andrew della Casa, a director at the Wine Investment Fund, one of the sector's largest players with 35 million pounds ($69 million) of funds under management.
He said the credit crunch had allowed funds to demonstrate how resilient alternative assets were in a real downturn.
"On the institutional side, the credit crunch may have crystallized thoughts that have been around for years, when they've been tracking the wine market," he told Reuters. "Now they have less options elsewhere they might say well, let's give it a go."
Although in a steep downturn, analysts say investment in art and wine will, like luxury goods, behave poorly, Della Casa said the wine market has a resilient core of demand.
"People say prices have gone up tremendously, they can only go down," he said, referring to how demand from emerging middle classes in Russia, China and elsewhere has driven prices.
"That's not the case -- there is static demand from North America and Europe and even if we just go back to that trend, we are still going to outperform every asset class out there. That's even if -- and we don't think we'll get there."
Most investors flocking to wine auctions are regulars stocking up their cellars, but a growing minority is taking a bet on key vintages. One buyer at Christie's earlier this month snapped up a case of Chateau Petrus Vintage 1982 -- one of the greatest vintages in recent decades -- for 32,200 pounds, at one of the auctioneer's most successful sales to date.
ART OF INVESTING
Interest in art has also remained buoyant -- Christie's also sold a Francis Bacon triptych for 26.3 million pounds ($52 million) this month: the highest price ever paid for a post-war work of art sold in Europe. Continued...
