Wine: Sparkling returns or years in the red?

Inflation seems to be easing so should I still be putting money in alternative investments like fine wines or have I missed my chance? What should I take note of if I still want to invest in wines?

- Lee Su Shyan

ALTERNATIVE INVESTMENTS

While inflation could be slowing, meaning rate hikes will ease, the markets are still volatile.

DBS chief investment officer Hou Wey Fook notes that "most individual and institutional investors are still under-allocated to alternatives", even though in the long run, these investments display a risk-adjusted outperformance.

Alternatives also include private equity investments, which focus on areas with long-term growth such as healthcare services, cyber security and decarbonisation technologies. These investments achieve their returns through creating value and growing the business.

The historical internal rate of returns of private equity investments are in the region of 10 per cent to more than 20 per cent, higher than those in public markets like shares.

Apart from private equity, alternative investments also include private debt and hedge funds. In general, alternative investments have a different risk-return profile from traditional ones.

WINE AS AN INVESTMENT

Chief executive of Wrise Wealth Management Derrick Tan suggests that investors should consider wine as an investment only if they have a strong love for good plonk.

He regards wine as akin to a passion asset, like cars, coins or watches, where investors get to enjoy the ownership of the item.

Data from fine wine global marketplace Liv-ex shows strong returns for fine wines from 2018 to 2023, said Mr Tan. The Liv-ex Fine Wine 1000 index has climbed by approximately 45 per cent, comparable with the rise in the S&P 500 of 40 per cent and the Nasdaq at 51 per cent.

A Knight Frank wealth report outlook for 2023 noted that rich individuals those with a net worth of US$30 million (S$39 million) or more, including their primary residence - will plump for art as their top investment of passion. However, wines are not far behind at No. 3. after watches.