Wine booming after 40% rise in 2010

By LEE BOYCE
Updated: 19:01 EST, 7 January 2011

Wine investors enjoyed a stellar 2010, with prices for the top vintages rising 40% on surging demand in Asia.

Fine wine: The red stuff is gaining popularity as an investment

Over the twelve months, the 40% rise for fine wine's benchmark index – the Liv-ex 100 – comprehensively beat the return investors gained on the FTSE 100, which rose by 9%.

And the gains are set to continue, according to The Wine Investment Fund (TWIF).

The fine wine investment specialists predict that the Live-ex will end this year 21% higher.

ESSENTIAL GUIDE: How you can become a fine wine investor

The star performer in 2010 was Château Lafite, with most of its vintages increasing by between 60% and 100%.

Added to that, the Liv-ex showed very low volatility. In eleven out of the twelve months, wine prices showed positive figures, with just a small fall in July.

The growth owes much to strong demand in Asia, where fine wine is proving very popular.

Record auction prices were set in Hong Kong, where cases of twelve wines traded for tens of thousands of pounds.

Gary Boom, founder of Bordeaux Index, said: 'Once more, the key dynamic has been continued demand from the Asian market.

'Chinese buyers in particular have got a taste for fine wine – and with alternative investment classes such as gold and shares limping through to the end of the year, it's hard not to give any other forecast other than for growth to continue well into the New Year.'

Will the boom continue?

One factor that could lead to much higher growth in 2011 is a strengthening of the Chinese currency, predicted by many forecasters.

This would mean that Asian buyers could pay more in sterling to acquire the wine at no extra cost.

But a falling away of demand from China would certainly affect prices, particularly for weaker vintages and wines which have benefited from an Asian 'brand effect', where their popularity has been boosted by the success of other vintages from the same chateau.

Andrew della Casa, director of The Wine Investment Fund, says: 'A year ago we said that returns of 40-50% in 2010 were possible and that has proved to be correct. It was another great year to be invested in fine wine.

'Demand from China doesn't look to be going away any time soon, and, with inflationary pressures rising, investors are increasingly turning to physical assets. So we believe that another good year could be in prospect.'

This is Money ran a wine investing series in Spring/Summer 2010 to help readers tap into some of the gains.

With many wine investing scams about, it is important to use only respected merchants and pick the right Bordeaux red vintages. Read our guides thoroughly before taking the plunge.

*Coming up...* This is Money's top wines for investing in 2011