Sergey Glekov
Senior financial analyst
How have fine and rare wines fared as an alternative investment class in 2020?
The Alti Wine Exchange Indexes are a family of equal weighted indexes which trace price performance of fine and rare wines and shows equal weighted average returns on them. The indexes are subdivided by most important wine countries:
- Argentina
- Australia
- US (California)
- Chile
- France
- Germany
- Italy
- Portugal
- South Africa
- Spain
2019 brought several challenges to the fine and rare wine markets – the Hong Kong protests, US wine tariffs and Brexit uncertainty. All these reasons caused a price pressure on the wine market.
In 2020, an even stronger factor took over an already tumultuous arena: COVID-19. Nevertheless, despite challenges from the pandemic, fine and rare wine prices managed to show robust returns while displaying relative low volatility in comparison to most financial markets in 2020.
The unusual nature of the past year caused modest decline of wine prices in the first half of the year when coronavirus volatility peaked, and strong performance in the second half of the year.
Besides COVID-19, an important factor in 2020 for the wine industry was the impact of the 25% US tariffs on European goods. In October 2019, the United States Trade Representative (USTR) levied 25% tariffs on all still wines under 14% alcohol by volume (ABV) from France, Germany, and Spain. Those tariffs were extended to still wines above 14% ABV from France and Germany in 2021. As a result, the demand from US, especially on Bordeaux and Burgundy wines, has declined.
Despite all difficulties, 2020 was a positive year for all regional wine markets tracked through the Alti Wine Exchange Indexes. The Argentinian wine index has performed better than others in 2020 (since 2016 as well). Australian, Chilean and Portuguese wine indexes also demonstrated strong results demonstrated in 2020.
Chart #1 – Alti Wine Exchange Indexes vs Key European Stock Indexes, June 2016-December 2020
Chart #2 – Alti Wine Exchange Indexes vs Key European Stock Indexes in 2020
What can we expect for 2021?
It is very likely that interest rates remain low.
This scenario will push investors to seek diversify their portfolio further and search for other sources of return – such as precisely fine and rare wine.
As we keep tracking the performance of fine and rare wines, more insights on the state of the market can be found here.