Exclusive interview: 'Hong Kong is hugely important to fine wine world market'
Scott Assemakis, managing director of European Fine Wines Ltd, talks wine investments with PFC
Much of Paul Fraser Collectibles' wine coverage has focussed on Asia's markets in recent times. Hong Kong, in particular, has been a constant source of buzz in 2011.
More than 15 new wine repositories have recently been set up in Hong Kong alone. Anthony Mak, managing director of one such repository, the Modern Wine Cellar, has even described Hong Kong as "a free-trade zone for wine."
Yet, as Asia's wealthy and nouveau rich go crazy for valuable vintages like the Chateau Lafite Rothschild 2008, wine dealers around the world stand to benefit. Among them is European Fine Wines Limited, a London-based broker which specialises in investment grade fine wines.
Fine wine 'blue chips' like Lafite are
When he isn't enjoying superb New Zealand Sauvigon Blancs from his own collection, Scott Assemakis, the firm's managing director, runs a company which claims to have helped its investors achieve gains of nearly 15% in seven months.
Recently, Scott kindly got in touch with Paul Fraser Collectibles to discuss the latest developments in the markets, and to offer his wine investing advice to collectors.
PFC: What sorts of people approach European Fine Wines Ltd to invest in wines? Are you seeing collectors and investors emerge from any particular countries or nations?
Scott Assemakis: Our clients are predominantly UK based, and are typically middle-aged and above, frustrated by poor returns from their other investments.
While we have sold Bordeaux wine to French clients, there is a growing trend for Hong Kong and mainland Chinese clients to store wine in the UK. The main service we provide to a client is to select the most appropriate wine collection for that person's budget and objectives.
PFC: What are the advantages of fine wines as investments?
SA: We recommend fine wines alongside mainstream investments. A basic principle of investing is diversity, and we absolutely maintain that fine wine should be considered by any investor looking for a balanced portfolio.
A major advantage of fine wine as an investment is that it consistently produces excellent returns over a long period, is less volatile than stocks, and has an active market for those looking to sell.
'General buoyancy in the market
Pretty good attributes for an investment, I'd say.
PFC: Hong Kong has been described as "a free-trade zone for wine." How would you advise worldwide collectors to benefit from this development?
SA: Hong Kong is hugely important to the world market for fine wines, and merchants and auction houses are seeing large volumes and high prices.
I believe this general buoyancy in the market to be most important benefit to the mainstream collector.
To actively participate in the fine wine (buying or selling) is certainly straightforward in Hong Kong. However there isn't any real difficulty in, for instance, the UK where we have a well-established market.
PFC: China's wine journalists have commented that many nouveau rich Chateau Lafite Rothschild 2008 buyers "know nothing about wine," and that their buying is down to brand obsession.
SA: Like all generalisations, there is an element of truth in these comments. But I believe a desire to buy 'the best' quite naturally translates into 'the best known' among people who have only recently become affluent, and in some cases extremely wealthy. This seems to work for Rolex, Gucci, Prada, et al.
Even in the UK, the most common response once people find out what I do for a living is "I don't know anything about wine."
I can assure you that on our regular visits to Bordeaux, we can see large contingents of Chinese buyers who are very well-informed and constantly acquiring more knowledge across the wide range of wines that are available.
PFC: What are your predictions for the future impact of China's wine collectors on the global markets?
SA: As the Chinese continue to make economic progress and develop their middle-class, their interaction with fine wines will eventually be indistinguishable from Western societies - ie, it will be a subject of passion and interest restricted to a minority.
European Fine Wines Limited
Even a minority of Chinese society is a huge number, which is great news for a luxury product in limited supply.
PFC: As a company that advises wine buyers from an 'investor point of view', what do you recommend that collectors should look for in a bottle of wine?
SA: Our clients are advised to build a diverse collection, with representative wines from a broad range of the best chateaux and vintages. In general terms, we look for a number of key factors including [that the wine is stored in] its original wooden case.
Provenance - where has the wine been during its life? For example, we reject wine for the investment market if it has US customs labels, although it may well be perfectly suitable for consumption. Wine that was delivered to a UK bonded warehouse, where it has remained, is regarded as "ex-chateau".
[Also] condition: are the labels torn, is the capsule damaged? Are the wine levels consistent with the age of the wine (the level will naturally drop slightly over the years)?
PFC: According to Liv-ex, prices for the First Growth Lafite "recorded the weakest price movement this year and is now marginally cheaper than it was in December 2010. By contrast, over the same period last year the brand recorded a year-to-date move of 46%" - why do you think this is?
SA: This [again relates to] the obsession for Lafite in Chinese markets. Pricing for Lafite defies logic.
Among the qualities Scott looks
Our portfolio recommendations don't concentrate on the first growth wines to anything like the degree of five years ago, as there is enormous scope for value and quality outside this narrow band while still maintaining investment grade.
When the market chased 2009, we recommended 2008 which benefited greatly from a relatively low price in comparison. When Bordeaux released 2010 pricing we held back, as we expect there to be more value for the later buyer.
There's no better argument for diversity in your collection than the price record of Lafite.
PFC: The internet has helped make the global wine markets "open to all". Are there pitfalls that collectors should beware when 'collecting via the internet'?
SA: Know your merchant. Get a condition report from an independent third-party. Pay by credit card. And store your wine in your own warehouse account, not the merchant's.
PFC: Finally, are there any particular vintages that buyers should look out for?
SA: Every collection should be built on the classic chateaux. But rising stars include Pontet Canet, Grand Puy Lacoste and, a firm favourite of ours, a wine from the Right Bank, L'Eglise Clinet.
It is still too early to judge the 2011 vintage, as there is plenty of time for weather to affect the harvest. We'll let you know in a month or so!
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