Ultra-rich investors are piling cash into fine art and wine as returns soar.
A boom in demand for modern art and skilfully crafted bottles of vino is pushing up prices – and making bumper profits for investors.
It’s a classic symptom of a bull – and, many believe, overinflated –market, where wealthier investors seek different assets to jump on.
Some of this return has been boosted by artworks such as Leonardo da Vinci’s 500-year-old Salvator Mundi painting selling for an astonishing $450million.
A boom in demand for modern art and skilfully crafted bottles of vino is pushing up prices – and making bumper profits for investors
Meanwhile, collectors who own a case of Chateau Palmer Margaux Troisieme Cru 2001 have seen their investment shoot up about 40 per cent in the past year.
Art and wine have been the fastest-growing alternative investments over the past year, rising on average 21 per cent and 9 per cent respectively, according to high-end estate agent Knight Frank.
By comparison, the FTSE All Share has risen 6.7 per cent.
The traditional way of investing in wine is through a broker, such as Laithwaites or JF Tobias. They should be able to give you a good overview of market trends.
However, they can be pricey. Expect to pay up to 10 per cent of the purchase price in fees and the same when you sell your investments.
But before you buy, use websites such as Wine-searcher or Wine Owners to make sure you’re not paying over the odds.
As a rule of thumb, to make a decent return on fine wine you need to spend at least £10,000, according to Peter Robson, head of trading at Wine Owners, a trading exchange. So what wines should you look at?
Robson believes Chateau Margaux 2012, which has shot up from £2,600 a case to £3,600 in two years, could continue to rise in value.
He also thinks the recent Chateau Lafite Rothschild vintages have decent investment potential.
Once you have a case of investment-grade wine, you need to store it properly – your garage will not do. It needs to be in a climate and humidity-controlled warehouse, which will cost between £8 and £15 per case per year.
Peter Robson, head of trading at Wine Owners, thinks the recent Chateau Lafite Rothschild vintages have decent investment potential
Another option is to invest in a wine fund, such as The Wine Investment Fund.
However, its returns are bumpy – investors have suffered losses in six of the past ten years – and at 1.5 per cent a year, it’s expensive. There is also a steep 20 per cent performance fee on returns if the fund does well.
Investing in art can be even trickier. Styles and artists can go out of fashion, meaning a painting worth a lot today may have little value in the future. And not even the experts can predict with great accuracy which pieces will shoot up in value.
You also have to be careful you’re not buying a fake. The Fine Arts Expert Institute estimated in 2014 that half of all works of fine art on the market were forgeries.
There are a small number of art investment funds available, but the sector has a chequered reputation.
So while investing in art may sound attractive, it is better to buy a piece you like rather than one you hope will bank-roll your retirement. If you make a good profit, it’s a bonus.
Tim Maxwell, a partner at law firm Boodle Hatfield, which advises clients on their art collections, said: ‘I’d say, for most people, investing in art solely to make money is a risky idea.’