EDOARDO NARDUZZI (AD SYNCHRONYA): “THE CRISIS LAUNCHES ‘WINE FUNDS’ AS A TRULY ALTERNATIVE INVESTMENT. THE FINANCIAL CRISIS IS MORE COMPLEX AND PROFOUND, MORE SPACE TO AFFIRM ALTERNATIVE INVESTMENTS”

The financial crises are more complex and profound, there are increased spaces for the affirmation of alternative investments: when traditional stocks undergo double digit losses as a consequence of the recession – Morgan Stanley World Index lost about 40% in 2008 – investors can orient themselves toward particular stocks that are capable of offering an effective hedging against the indexes or even positive earnings. This is the case, for example, with specialized investment funds in the wine sector.
It means there are intermediaries who emit guaranteed stocks for prestigious bottles of wine owned by a fund and that guarantees the value of the certificate that has been emitted. Usually, they invest solely in the big wines of Bordeaux like Petrus, Cheval Blanc or Margaux, though a part of the portfolio may be destined to selecting investments in the most internationally renowned bottles of Burgundy, Super Tuscan or Piedmontese wines.
Over the past 18 months various wine funds have been created and their performances in 2008 have been impressive. The Arch Wine Fund of London, for example, has increased by 0.5%, completely preserving the entire value of the capital invested and almost completely recuperating inflation. Thus, in real terms, it has offered an almost optimal coverage of investor patrimonies.
The Elite Advisers Nobles Crus of Luxembourg has seen its value increase by 20%, while at the end of November the Vinum Fine Wine Fund of Guernsey lost 3.1% on an annual basis but knew how to earn in the most difficult months of the financial crisis: +12% in September, +15% in October, and +2% in November. The movements and earnings of the first wine funds demonstrate that this type of asset is truly an alternative for investors: they do not follow the normal cycle of indexes and, therefore, reacts a bit like gold does, as an excellent hedging tool for portfolios.
But what determines the earnings of a wine fund? Just as in a fund specialized in stock investments, the value and the earnings over time of a wine fund are correlated to the diversification of the portfolio created by the manager. As is the capacity to choose the bottles and the vintages more capable than others to produce earnings over time. So that wine does not distribute its dividends and has a manageable cost linked to its conservation, it is obvious that earnings for the investor reside totally in re-evaluation, year after year, of bottles selected and held in wine cellars.
Whatever happens this time, the profundity of the financial crisis has opened a strategic window that affirms wines that, for years now, have attempted to create a stable spot within the space of the business of alternative investments. But, when the stocks grow without too much fear, proposing and affirming innovative investments based on original goods is definitely not easy. Investors prefer sticking with traditional stocks.
When real taxes are negative and liquidity no longer renders anything while investments in stocks are excessively volatile, then alternative funds become an interesting class of asset allocation. And for investors with more patrimony it is a permanent opportunity to place a percentage of their portfolio in a truly anti-cyclical tool like wine. During the crisis, the physicality of a good reassures all, even disoriented savers.
Edoardo Narduzzi
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