Time to stock up on top French labels, says wine expert

Fund manager says wine investment is similar to equities and the golden rule is, think long-term

PUBLISHED : Monday, 17 December, 2012, 12:00am
UPDATED : Monday, 17 December, 2012, 5:31am

Wine investors may have had their fingers burnt as some of the top French wine labels have fallen by 30 per cent from their peak, but Schroders senior adviser Alan Brown believes this may just be the right time to pick up some of those labels.

A fund manager for more than 38 years, Brown is an oenophile and has a collection of 3,400 bottles, accumulated over 20 years.

To him, wine investment is similar to stock investment in many aspects. "Wine prices usually follow the equity markets though there may be some disconnect and differences at times," he said.

Prices of top-end wines are down from their peak by 30 per cent this year, similar to the stock market decline last year.

Brown said 1997 was a good year for French wine because of the good weather and rich harvest but it was followed by three calamities in the early 2000s: the tech stock bubble burst, the US dollar weakened, and the Iraq war erupted.

As a result, the first growth, which were bought at £1,200 per case of 12 bottles, sank to about £800. They have climbed back to about £3,000 (HK$37,500) since.

The golden rule for wine investment, thus, would be similar to stock investment, Brown said. "Take a long-term view. Don't buy high and sell low. The price may recover in the long term."

Like the stock market, investors may flood the market to chase hot stocks, which, he said, was what happened in China in 2009 and 2010. After the global crisis, the Chinese began to flood auction houses and wine merchants' offices and pushed fine wine into bubble territory.

The price level in 2010, he said, was just not sustainable and it was hardly a surprise the bubble eventually burst when the mainland economy started slowing this year. After that, he believes, people would not want to return to the high-end Bordeaux area and instead, try wine produced by other French regions or countries that provide the same quality for more reasonable prices.

"If the equities market maintains a good run for a year, the confidence will return and you will see wine bulls back in the market," Brown said.

He said the key to success in wine investment was no different from that in stock investment. One should take a longer-term view and not just look for short-term gains, and one should keep a diverse portfolio.

"My wine portfolio, like my stock one, is very balanced. You do not necessarily need to go for the top wine but it is better to have a collection from different areas and different countries."

And if investors have already lost a lot in their wine investments, his advice is: drown your sorrows in wine. "The beauty of wine investment is the options it provides. If the price is up, you can sell it for a profit. If price goes down, you can hold it for the long term. Or, you can simply drink it!"