Weak euro presents window of opportunity in wine investments

SINGAPORE : Observers said they have seen a higher demand for assets like vineyards and wine-related investment products recently.

That is partly due to a weaker Euro currency which presents wine funds a stronger buying power when making acquiring assets in Europe.

The wine market is expected to grow at 5 per cent a year in Asia, compared to the world average of less than 1 per cent.

China is expected to be among the leading growth markets - rising about by around 30 per cent over the next three years.

Currently, China accounts for 4 per cent of the world's total wine consumption valued at some US$ 7 billion last year.

This is expected to reach US$ 9 billion by 2013.

"Over the past years, fine wine as an investment has definitely made its place in the alternative asset class mantle. It has, for one thing, low correlation to traditional asset classes like stocks, bonds and commodities, and has also proven itself to be highly resistant to major financial market instability," said Yoanna Yasmine, assistant director of Premium Asset Management.

The company said it plans to double its product offerings from next year - by launching an additional fund portfolio.

It added that wine investments also offer better gains.

For example, the industry leading benchmark index called Liv-ex Fine Wine 100 has risen by about 40 per cent over the last 12 months from 216.21 to 304.67.

Comparatively, the S&P 500 saw a rise of about 11 per cent over the same period.

Premium Asset Management said its wine funds have been averaging returns of about 2.1 per cent a month since its launch about 3 years ago.

Another player, Fine Wine and Estate Advisors is also setting up a private equity fund to acquire vineyards.

It will also participate in the distribution and production of wine.

The company believes the weak Euro currency presents a good opportunity to acquire good value assets.

"Recently the Euro has declined dramatically, so for local investors in local currency, it will cost less to invest now than to invest six months ago," said Bruno Leroy, founding partner of Fine Wine & Estate Advisors.

The company is projecting returns of between 10 per cent and 15 per cent annually over an investment horizon of at least eight years.

Observers said wine investments are generally a mid to long term in nature and will need an investment horizon of at least 5-10 years. - CNA /ls