As we settle back into our daily routines after the summer, I wanted to share some thoughts from a recent trip to Bordeaux. You’ve likely noticed that the wine market – and especially Bordeaux – has gone through a correction over the past three years. As with any asset, these periods of uncertainty create opportunistic entry-points. This trip reinforced my conviction that now is a particularly auspicious time to invest in Bordeaux. Besides the fact that the best wines Bordeaux will ever produce may already be in bottles, here are my convictions when looking at the wider context:
Stay Real
Geopolitical tensions and government spending are driving inflation, pushing investors towards defensive real assets like gold, which has reached record highs. Surprisingly, fine wine – another proven resilient tangible asset – remains vastly overlooked.
Buckle Up
Faced with inflated equity markets, wine offers defensive strength. Research we’ve done with Stanford Business School shows how Bordeaux wine is one of the most resilient real asset classes, and brings unique protection during uncertainty. Drawdowns are typically far smaller (-40%) than equities or other traditional assets.
Now or Never
Climate change is reshaping the wine world before our eyes, demanding swift and decisive action. Château Lafleur’s recent withdrawal from the Bordeaux and Pomerol classifications is bold, and highlights the challenges producers face in maintaining quality amid rising temperatures and erratic weather. I am confident that in a few years, we’ll look back at the 2009, 2010, 2016 and 2019 vintages as the golden era for claret.
Here are some questions that I’m often asked:
(i) Can wine prices go lower?
Of course, any asset can go lower. Our market analysis suggests prices are now stabilising at new lows, and only a major shock could push them further down. Even if it does, wine – being a strong defensive asset – would still likely outperform most traditional asset classes.
(ii) Can I wait 6 months or a year?
Timing the market is tricky. Once the market turns, experience tells us that volumes dry up fast. By waiting for a slightly better price, you risk to drastically reduce your position – or miss out entirely on the best wines, which will quickly disappear.
(iii) Why 1275?
1275 is the only global firm that fully documents each individual case of wine, monitors its end-to-end transport directly from the estates, and offers custody inside its own secure bonded warehouse in the Geneva FreePorts. Guaranteeing and documenting rigorous provenance and authenticity is paramount to the security of your wine portfolio, in addition to respecting the work of the world’s best winemakers. We believe this will command a significant premium in the coming years, as provenance becomes increasingly vital for long-term value protection.