Timing is everything. If you bought Bordeaux before everyone piled in, and offloaded before it crashed, you’re laughing. But if, like many novice Asian wine investors, you’re pretending you always intended to drink that case of 1982 Chateau Lafite that’s now worth half what you paid for it, it’s not so funny. Aware that pure wine investment can get a jaded response, one fund has come up with a different twist on this happy asset class. It’s basically fine wines and rare spirits in your chosen combination, with the emphasis on 18th and 19th century cognacs.
Something different for HNWIs
This might suit High Net Worth Individuals who are bored with art and watches and fancy a flutter on something new. And they store it properly for you.
David Nathan-Maister is a former Stellenbosch winemaker who now lives in France. He’s director of Oracle Paradis Wine Fund, which offers two share classes: fine wine and old rare cognacs. The idea is the less-volatile cognac is a hedge against flat markets and capital loses, apparently.
His theory is this. Fine cognacs bottled 100 to 150 years ago are undervalued. If, 30 years ago, you took a case of one of the best years of Lafite as benchmark, it was worth the same as a bottle of 1811 cognac, depending on the quality of the bottle. Today, one bottle of Lafite is worth the same as the 1811 cognac. “Anywhere from US$3,000 or 4,000 to US$20,000. We feel something’s out of whack – either the wine is too expensive, or the cognac is too cheap.”
In many cases we’re talking about familiar labels, like Hine, Courvoisier, Martell, Remy Martin and Delamain, but also smaller cognac houses. It’s hard to find. Much of the good stuff is in the cellars of top European restaurants and hotels or comes up at auction. But at euros 800 or 1,000 a shot it’s often too expensive for restaurant customers. So they can often be persuaded to discreetly liquidate the odd prized bottle.
Nathan-Maister makes a strong case for the virtues of ancient cognac. Not only is it 100 years older, he says, but the modern stuff is made from different, inferior grapes. This dates back to phylloxera, which wiped out vines, including the Folle Blanche used for making cognac since Roman times. Winemakers had little option but to replace the folle blanche with the Italian ugni blan, which was resistant to phylloxera and suited to the Charente region. Previously used for making industrial alcohol, ugni blanc is still used for cognac to this day, explains Nathan. “It was not regarded as a quality grape, but it was all they had.”
Cognac - better bet than wine
It also trumps wine because spirits, being more robust, rarely deteriorate in the bottle or become corked. And there are few fakes, he adds, except for the Spanish rocket fuel brandy which made its way into America via Mexico during the 1930s following prohibition. Some of that survives.
The best vintage of the pre-phylloxera era, he says, was 1811. It was the year of the Great Comet, visible in daylight in summer in Europe, so this has been known since as the "Comet Vintage", and some bottles have the comet on the glass seal on the shoulder.
Bahamas- based fund
The minimum investment in the Bahamas –registered fund is US$100,000 (HK$775,000). Funds so far invested in its six months of operation total US$5m (HK$38.8 million), mostly from eastern Europeans, with the target US$15m (HK$116 million) by mid-2014. Management fees are 2 per cent. They also take a slice of the profits, but “terms are negotiable depending on the size of the investment.” Nathan-Maister warns this is not a fund for flipping after a few months. “We’re looking at this as a long –term thing.” He’s aiming for a yield of 10 per cent per year over five years.
Nathan-Maister, who, according to the internet is also in the absinthe business, has every confidence in the charisma of old cognac. “If you have a 1961 Labour it may taste wonderful, but it’s just 50 years old, within the lifetime of many people. But with a 1788 cognac: Marie Antoinette was alive then and the French Revolution had not yet happened. It can give you goose bumps. I’ve seen hardened businessmen moved to tears when they think about that.’