The Fine Wine PCC Limited Bordeaux Fund (“the Fund”) was launched in 2008 as the ideal way for pensions and wealth managers to securely access the growing investment market in Bordeaux investment grade wine. This Guernsey domiciled, listed OEIC has returned to form after the negative effects of gearing. It is now perfectly positioned to take advantage of a predicted 14% rise in Liv -ex for 2013 recently made by the Fund’s Manager. With an experienced fund manager, strong management team, robust corporate governance structure, credible independent valuation methodology, and gearing removed, this could be the fund that finally establishes investment grade wine as a legitimate alternative asset class.
It’s been a volatile 5 years for a Fund launched off the back of an impressive bull run in Fine Wine prices in 2008. “We have learnt a lot about Fine Wine in that 5 year period” says Stratus Capital’s CEO Robert Allison. “We’ve found out that in times of severe global financial stress Fine Wine held up well relative to most other asset classes, but we also found out that Fine Wine was not quite the un- correlated asset class that many had been extolling. The market did respond to a global sell off and as a geared fund our performance amplified that. Our principal lesson was don’t try and be clever and change the main attraction of Fine Wine as a defensive investment by introducing unnecessary volatility. Had we not had the gearing our NAV would be in considerably better shape. Our manager’s underlying performance has been excellent since launch with the underlying portfolio being +10.7% up compared to Liv-ex’s +4.2% in the same period. However, the gearing amplified the downturns and contributed to an excessively high cost drag on the Fund. That lesson was heeded and having shed the expensive gearing, the Fund is now a pure play on the active fund management strategy pursued by the Fund’s manager. The Fund has been + 4.6% up over the last 3 months and shown 3 consecutive months of NAV growth.
Fund performance is driven by Chris Smith and William Grey of Anpero Capital who manage the Fund, regularly analysing the Fund’s portfolio and making active stock selections across a variety of investment grade Bordeaux wines. This is supported by the manager’s proprietary analysis which determines the optimal buy/sell triggers for certain vintages. Smith is confident that 2013 will be a much better year than 2012 which saw Liv-ex fall 27% over 12 months from its all-time high in June 2011.“ We saw a lot of institutional selling in 2012 compounding a dismal ‘en primeur’ season for the 2011s. Continued buying from China was cancelled out by drops in demand from Japan due to a faltering economy. Prices have been recovering since July of last year and we are bullish that by the end of 2013 the market will have gained by 14%. Our optimism is based on seeing institutional sellers drop away, sustained support in the market for the recovery in prices, Sterling’s weakness against the Renminbi and Yen which has meant Asian buyers have seen value, and prices having fallen to levels at which European consumers are again buying to drink. We saw this act as support for some particular wines in 2012 whilst the general market fell. Add to this many high net worth investors’ fear of anticipated inflation, the accumulation of physical assets will see many becoming buyers of high grade investment wine”.
Stratus’s Allison cannot help but reinforce the attraction of Fine Wine in an era of global money printing and the inevitable fear of inflation. “With central banks looking to inflate their debts away, and depreciation of currencies it’s becoming increasingly obvious that the world’s wealthy are looking very seriously at SWAG assets (Silver, Wine, Art and Gold) as a means of wealth preservation. Our role is to convince professional investors and institutions that buying exposure to wine through a collective should be as easy as buying an ETF in Gold or Silver. Our aim is to be there at the tipping point when professional investors switch onto the fact that investment in wine is a valid strategy for preserving wealth and that we have the appropriate investment vehicle to access the market. We will continue knocking on doors and making the case for the Fund because we think we have a compelling story to tell and over the long term we will be proven right”.