Q3 2020 Investment Overview

Cult Wines Financial Overview and Quarterly Performance Summary

•  Global Markets Overview
•  Fine Wine Market Overview
•  Trade Overview
•  Cult Wines Performance
•  Market Outlook

 

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Cult Wines Q3 2020 Performance Introduction

Portfolio based investment grade wine is one of the most established alternative assets available to investors looking for tax-efficient, asset backed diversification and capital growth opportunities. Over 13 years, Cult Wines has become the global leader in wine asset management, providing analytically based, fine wine investment advice. Combining our experience in the fine wine market, statistical and quantitative research and algorithm based modelling, our unique approach has driven our Assets Under Management (AUM) to over £150 million. Our own CW index returned +124.89% since October 2009 (annualised returns of +7.71%). With low interest rates, inflation concerns, low returns from traditional financial assets and an uncertain economic outlook, many investors are looking at ways to enhance their portfolio returns, diversify exposure and generate consistent capital appreciation.

This Third Quarter overview summarises the global financial and fine wine market performances to September 2020.

Q3 Fine Wine Market Overview

  • Both Liv-ex 1000 (+1.9%) and Liv-ex 100 (+3.6%) posted strong gains in Q3, reversing losses seen the first half of 2020.
  • The First Growths of Bordeaux gained 2.7% in Q3 for a total of 5% since March 2020.
  • The third quarter saw the Champagne, Italy and Rhone regional indices achieve new closing records.
  • Champagne continues to provide excellent liquidity with bid-ask ratio nearing 1 in August*
  • Italy saw a big jump in trade share, led by recent vintages of Super Tuscans and growing appetite for Barolo.
  • Emerging wine regions registered positive investor flows during La Place’s September releases .

Q3 Cult Wines Performance

CW Main index, which includes all-regions, closed the quarter with a strong gain of 1.1%, pushing the year-to-date performance to 1.6%. Within the CW main index, most regions had their best quarters so far this year, with CW Italy (+4.9%) considerably leading the gain, followed by CW Champagne index (+3.3%) and CW Rest of the World index (+3.0%).

View the full Cult Wines market performance breakdown in the Quarter THree report document.

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2019 Bordeaux EP

COVID-19 impact is widespread, humanly and economically. The virus spared no one and no area of the world. Bordeaux and the wider wine community were certainly not immune. With France and the rest of the world in full lockdown, it was impossible to travel to the usual Bordeaux En Primeur week to taste the new 2019 vintage and run an effective campaign. The Union des Grands Crus therefore suspended the campaign indefinitely.

Even before Coronavirus was part of our daily vocabulary, Bordeaux was experiencing severe headwinds. Its market share of the wine trade was gradually eroding to reach an all-time low of 41% this year. Mixed return performance of recent vintages despite quality, evolution of tastes and global demand, competition from other wine regions all weighed on Bordeaux wines. Then, USA imposed a 25% tariff on European goods, targeting French wines, threatening to increase it to 100% in trade war escalation. The added uncertainty from the second biggest market for Bordeaux was the last blow to confidence. By the end of Q1, Liv-ex Bordeaux 500, the benchmark for the region, has dropped 4.9% year on year.

As with everything post COVID-19, we witnessed a great experiment of adaptation from Bordeaux and the wine industry, demonstrating once again the resilience of this unique product which has been part of human history and heritage for centuries. After all, Bordeaux survived wars, revolutions, and epidemics throughout time.

Samples of the wines were shipped to major critics and merchants across the world and as France gradually exited lockdown on 11th May and the prospect of a pre summer En Primeur campaign became real and excitement for Bordeaux 2019 started to build up fuelled by rumours about favourable pricing.

While barely two months ago the traditional EP campaign was faced a very uncertain future, 28th of May marked the first major Bordeaux 2019: Pontet Canet released at a price 31% lower than its 2018 En Primeur price. By the end of June, EP 2019 was finished successfully in a noticeably short 3-week period (the traditional campaign normally spreads across 2 to 3 months).

Quality – It is now widely publicised that 2019 is a very good to exceptional Bordeaux vintage which might stand shoulder to shoulder with 2016 and 2018, with impressive results from some of the producers. Most wine critics have now published their full review along with scores. Neal Martin published its EP 2019 report named “Uncertain smile” in mid-June stating that the 2019 is a wonderful vintage to finish the decade, and it is a style of wine that he personally adores.

Lisa Perrotti-Brown from the Wine Advocate also published her review of “the Miracle Vintage”, giving high praise stating that 2019 is an outstanding vintage and expressing her optimism by the consistency in quality across wine producers from different levels.

Top-scored wines from multiple wine critics include La Mission Haut Brion 2019 (98-100 WA & Vinous), Figeac 2019 (98-100 WA, 97-99 Vinous) and Pichon Lalande 2019 (97-99 WA, 98-100 Vinous).

Indeed, with the confirmation of the high quality of the vintage by the leading critics and producers, there were reasons the be excited about this campaign. With comments comparing 2019 to 2015, 2016 and 2018, a quasi-perfect growing season and the return to a more classic Bordeaux style, there will undeniably be some amazing wines, possibly legendary, once bottled. Volumes on offer though were 10 to 30% down depending on Chateaux, making it a competitive campaign for those trying to secure the best wines.

Prices – Our primary objective, as ever, was to assess the relative value and potential of the new releases, relying on past experience and quantitative analysis. We acted quickly when new opportunities emerged. Looking beyond quality, a comparison with the background of the 2008 EP campaign was inevitable for investors.

History remembers that it was an extremely successful campaign as prices were reduced by up to 50% from the 2007 release and it attracted strong interest. Historical performance of the 2008 vintage also confirmed the impact of attractive EP release pricing has on investment return over the long-term.

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Quarter Three Investment Overview 2020

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Quarter Two Investment Overview 2020

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Quarter One Investment Overview 2020

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Quarter Four Investment Overview 2019

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Quarter Three Investment Overview 2019

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Quarter Two Investment Overview 2019

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