Cult Wines, a specialist in the acquisition & investment management of fine wines, is set to open a new office in Hong Kong to take advantage of increasing demand in Asia for investing in fine wine.
Cult Wines, which was ranked 40th in The Sunday Times Virgin Fast Track 100 2015, has seen annual profits increase by 105% in 20151. The firm specialises in the procurement, management and eventual successful liquidation of the world's finest and rare wines. Founded in 2007, Cult Wines has grown to become one of the UK's largest wine investment companies managing private and trade client portfolios on behalf of more than 1,800 clients across 55 countries. Assets under administration are around £30 million with the firm aiming for sales of around £25 million next year and £50 million by 2020. (2015 sales: £17 million)
Cult Wines has seen the rise of new markets such as Hong Kong and China, which have driven growth in the fine wine market in recent years. Of the US$352 million of wine sold at auction in 2014, for example, some US$104 million, or 30%, was accounted for by Hong Kong alone2. By 2024 it is predicted that China will boast nearly 15,700 ultra-high net worth individuals (UHNWIs) and 338 billionaires3. It is already the single biggest consumer of luxury goods around the world, accounting for some 29% of the global luxury spend and its consumption of wine has been growing by 20% a year4.
Cult Wines has identified strict limitations on supply and rising demand from wealthy buyers in Asia. Indeed there are more than a million wine producers in the world, producing approximately 2.8 billion cases of wine each year yet global consumption is around three billion cases per year5. At the same time fine wine has increased in popularity as a wealth store, providing a hedge against inflation, protection against low interest rates and currency fluctuations.
Tom Gearing, BBC THE APPRENTICE (2012) finalist and Managing Director at Cult Wines, said: "We're delighted to be launching our proposition to the Asian market and are very excited to be working with strategic investment partners in China. Our performance over the last year has helped us cement our position as one of the leaders in the wine investment market and we see targeting the Hong Kong & China market as a natural extension of our current growth plans and this will certainly help us to consolidate our services to a growing client base in Asia.
"For many people wine collecting is seen as a hobby for the rich but more recently fine wine is being recognised as a genuine alternative asset class, providing significant diversification benefits from mainstream financial markets. Not only can the sector provide strong returns under expert guidance but it is an enjoyable, collectible, tangible asset that has a very exciting future.
"Fine wine investment can act as a defensive holding as it has the capacity to remain stable under difficult economic conditions. It has the advantage of not necessarily following the general trend of lagging behind the rest of the market during economic expansion because demand is consistently strong. Real assets remain an attractive option as they tend to change in value independently of the core financial markets."
Over the past decade an investment in Burgundy would have yielded a compounded annual return of 10.63%. With the Burgundy 150 index appreciating 174.74% in that 10 year period. It is also worth noting that in light of the Federal Reserve Bank of America (Fed) raising interest rates in December 2015, there has also been a rise in the Liv-ex Fine Wine 50 Index. Indeed if we look back to the last time the Fed raised rates in June 2006, this was the year the Fine Wine market really began to motor. Bordeaux's share of trade leapt from 78% to 92%. The First Growth's share of the market rose from 29% to 45% and the Liv-ex 100 rose 50% year on year to 154, en route to 365. Today it stands at 237.
