Some Wine Investors Defying the Downturn

            Financial turmoil may drive investors to drink but this could be a
            boon for some of them. The Noble Crus fund, which invests in fine
            wines, had a vintage 2008. Launched in November 2007 and now
            managing 11 million euro ($13.9 million), the fund returned over 20
            percent last year.

            "Our portfolio is focused on the Burgundy region, and we like older
            wines whose valuations tend to remain stable. Market risk is quite
            remote for this kind of wine," said Michel Tamisier, owner of Elite
            Advisers which promotes the fund.

            "France's other important wine region, Bordeaux, tends to produce
            more wine. It is more easily accessible, and so the financial crisis
            has had more of an impact on prices. Younger wines are also more
            sensitive to price fluctuations," he said.

            A significant part of the fund is invested in older Bordeaux
            vintages, which have maintained their value or appreciated.

            But in some cases, wine investing can bring on a hangover -- it was
            a much tougher year for the Vintage Wine Fund, which focuses on
            wines from Bordeaux.

            Probably one of the world's largest wine funds with over 100 million
            euros under management, Vintage's value fell 33.4 percent last year.

            The decline occurred entirely in the last third of the year, with
            much of it attributed to what the fund called "essentially foreign
            exchange related reasons". The fund, which reports net asset value
            in euros, was hit hard by sterling's sharp year-end decline.

            The fund said that by basing valuations on ex-chateau prices quoted
            in euros by Bordeaux vendors, it could have booked a profit for the
            year; but for consistency's sake it maintained its current valuation
            method, which is based on UK list prices.

            One problem for investors in this kind of fund is that despite the
            physical nature of the underlying product, wine funds may be
            difficult to liquidate: such niche funds have few buyers and
            sellers, and so bid-offer spreads can be volatile.

            "Spreads vary between merchants and can be quite large. You don't
            want to have to liquidate your portfolio if you get a redemption
            request, because you may not get the best prices for the wines,"
            said Tamisier of Elite Advisers.

            To contain this problem, he said the fund holds at least 10 percent
            of its assets in cash, and ensures that no client accounts for more
            than 10 percent of the fund.

            Even so, if a rush of investors wanted quick access to their cash,
            they might have to sell at a discount to net asset value.

            If that is too unpalatable a thought, one way out is to take
            physical possession of their share of the fund.

            In that case, if they want liquidity, they will need a corkscrew.