Some wine investment funds have taken a hit in recent years as top-tier Burgundies and Bordeaux have slid down in value but wine funds aimed at middle-tier labels are raising a glass to the rosy returns on their investments and continue to attract investors.
As an investment strategy though, investing in wine is not for the faint of heart.
Wine funds began grabbing headlines in around 2009 as prices of the most sought-after labels began to spike in value. Pricing data tracked by Liv-Ex.com shows the top 100 labels gained 75% from the start of that year through mid-2011. Since then, prices have fallen, dropping by 25% through August.
Despite the slump, funds focusing on wines that are a few rungs down the top-label ladder remain confident about the earnings they are generating for investors.
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“In wine, what happens in downturns is that the big names fall the hardest,” said Brian Mota, co-founder of TWT Investment Partners LP. “We like to be positioned in names that are not the tip of the iceberg.”
The Oracle Paradis Wine Fund was launched six months ago in the United Kingdom, according to director David Nathan-Maister. This month, the fund announced it had purchased one of the oldest bottles of white wines from the Jura vineyards in France, a 1781 Chateau Chalon valued at about $50,000.
In total, the Oracle fund has attracted about $5 million in investment through a dozen investors, including some from the U.S. Mr. Nathan-Maister said the firm aims to raise $15 million over the next 12 months, and the fund is on track to deliver returns above 10% by the end of the year.
The fund has homed in on three wine and spirit categories beloved by expert collectors — 19th-century Tokaji wines from Eastern Europe, French wines from the Jura vineyards and 19th-century cognac.
“The prices in these specialist areas have not increased to anything like the degree that [the big labels] have,” Mr. Nathan-Maister said. “We feel, therefore, that there's underexploited value in those areas.”
Mr. Mora has a similar strategy for The Wine Trust, which he launched in August 2011 with partner Timothy Clew, just after the height of the fine-wine price spike. The fund is private-equity based and focuses on long-term holdings. The partners aim to acquire midtier wines that are less subject to sharp price downturns, he said.
Mr. Mora declined to disclose the amount of assets that the fund has under management, but said it has been making annualized ! percentage returns in the midteens.
Another fund — The Bottled Asset Fund — was launched with an initial $9 million investment in 2010 and expects to generate returns of more than 30% when its strategies are exited in the next four to five years, said fund director Sergio Esposito. He said the fund focuses lar
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