Liv-Ex Market Report
by Liv-ex.com, October 2011
(analysed in detail in full report)
Joe Roseman, former economist at Moore Capital Management, argues that investors should prop up their portfolios with a new style of asset class: SWAG (silver, wine, art and gold). An ideal investment
is one that combines low risk with high return. Our analysis of the SWAGs' individual fortunes over the last decade reveals that fine wine recorded the lowest volatility (a measure of risk) and the second-highest
return in the ten years to August 2011, making it one of the group’s top performers. To view analysis in full, visit www.blog.liv-ex.com.
Final Thought - Fund performance
In the latter half of 2008, during the last major fine wine market correction, the wine fund sector took a battering. A number of funds failed—mostly due to questionable valuation methodologies and poor investment decisions—
and the better operations faced a wall of redemptions. It is estimated that the total value of funds under management halved in less than a year (from a high-point of €300 million in June 2008).
Those funds that survived have, for the most part, prospered in the intervening period. On all but the shortest of timescales, the funds listed below have provided investors with excellent returns—buying into any of the major funds at the tail end of 2008 would have resulted in a handsome profit of between 30 and 60 per cent. Little else outside of precious metals has performed so well during the difficulties of the last few years.
Nevertheless, it would appear that the majority of funds failed to attract massive amounts of new money. Indeed, the total amount of funds under management in the UK has not risen significantly faster than market pricing—
there appears to be far less ‘hot money’ in the system than we saw in early 2008. (It is the BRICS that have been the most active in this regard, with new funds having launched in India, Brazil and China in the last 12 months.)
The counterpoint to this is that despite the relatively sharp correction of recent months, the level of redemptions appears (anecdotally) to be significantly less than during
the latter half of 2008. Those investors who have targeted the sector in the last few years have proved, so far, to be rather more sticky. The question now is, will the recent market correction
attract new long-term investors who view fine wine as a legitimate alternative?
The table above lists all of those funds that provide a monthly, published NAV. There are a number of factors to consider when making direct comparisons between them. Currency, in particular, is a complicating
factor. The sterling-based funds are flattered over longer timescales when compared to those priced in dollars or euros due to the weakness of the pound. The gearing of the Fine Wine Geared Growth,
which causes large volatility, should also be considered. Despite its rapid rise in recent years, those who had invested in the fund at launch would still be sitting on losses.
Similarly, the Fine Wine Investment Fund has created a simulated “NAV” across all of its tranches, net of fees, for comparative purposes. It has not been independently verified and, as an average
across several tranches, may not reflect all investors' experiences in the fund. Finally, there is no common valuation methodology across all of the funds. We continue to believe that the Liv-ex Mid
Price is the most robust and transparent, currently available in the market.
To trade on Liv-ex or subscribe for price information, visit www.liv-ex.com
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