Icap chief uncorks wine investment

Michael Spencer, chief executive of broking giant Icap, has made a seven-figure personal investment in Bordeaux Index, the online wine trading exchange, and is to become chairman of the privately owned company.

Founded 15 years ago by Gary Boom, a former Icap main board director, Bordeaux Index offers live trading in fine wines, one of the fastest growing alternative investment classes in recent years as Asian buyers drive prices of classic vintages to record highs. With 13,000 registered traders, it has offices in London, Hong Kong, Singapore, Beijing and Shanghai, and Asian buyers account for half its £100m sales in 2010.

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Declaring pre-tax profits of £6m in that year, the company is expecting sales in mainland China to double next year as the Chinese taste for investing in wine matures, and says that one-third of its customers buy wine as an investment they will trade, rather than drink.

“I’m genuinely impressed by the growth of the business, and the way it has developed its market in Asia by applying the techniques and technology of financial markets to fine wines,” Mr Spencer said. A renowned connoisseur of fine wines, he described his personal wine collection as being “large enough”.

“Wine is one of the last great commodities in the world to be dragged out of the dark ages and traded on a global index,” said Mr Boom. “We are more than a traditional wine merchant, as we can handle both sides of a trade, increasing transparency and liquidity in the market.” In addition to Asian expansion, Mr Boom has his eye on Brazil, Russia and India as future markets. “India currently charges duty of 40 per cent on wine imports, but if the government drops that rate, it may well be the next big market to open up,” he said.

Stating that wine prices were often “pretty similar to a bond yield curve”, he said: “For example, we tend to find a case of 1986 Mouton Rothschild trades at 55 to 56 per cent of the price of a case of the 1982 vintage.”

When Mr Spencer became Conservative party treasurer in 2004, he pledged that when a Conservative prime minister was in office, he would host a dinner for party funders and serve bottles of Petrus, the Bordeaux appellation regarded as producing “the king of wines.”

He did so at the 2010 party conference in Birmingham, when he stepped down as party treasurer, presenting a case of 2001 Petrus from his own collection, as the vintage matched the year in which David Cameron first became an MP.