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Liquid investments: Meet the man channelling the $4bn fine wine investment market

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This man promises double-digit returns

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“It started off as a hobby but now it’s gone a bit mad,” laughs Peter Shakeshaft.

It’s a gloriously sunny day and Shakeshaft is calling me from The Goring Hotel, about to enjoy lunch and no doubt drinking a nice glass of Burgundy.

But Shakeshaft’s interest in wine goes further than enjoying the odd tipple, having set up his company Vin-X, a specialist fine wine investment broker, his livelihood rests on the red stuff.

Despite being on the end of a market correction, Vin-X is now delivering 15 per cent growth per annum for its clients (outperforming the FTSE 100 and S&P 500), and as a company has grown 50 per cent year on year since its creation two years ago.

It seems that while the economy is sluggish to say the least at home, wine is an increasingly international commodity.  According to International Wine and Spirit Research (IWSR), China consumed 1.9 billion bottles of wine in 2011, leaving us for dust to become the fifth largest wine consumers.

Shakeshaft reckons investment in fine wine will double in the UK as more private investors put down the wine glasses and start buying and exiting profitably on their cases of rare Latour.

So how does it all work? Should we all be investing in wine? And can you make a living out of an extensive knowledge in wine? Here’s what Shakeshaft had to tell me.  

So Peter, how did it all begin?

“Well I’ve got a background in the city and because of the fantastic gains on wine I was an investor myself. I realised that like me, many people were sick of stocks and shares with their low returns.

“But there was nowhere that I could get advice on my wine investments, how to buy, how to store and how to sell, so I had the idea of making it easier.

“I rang about 100 people I knew to see if they would be interested in investing in fine wine – the resounding answer was yes!

“I really want to make sure that when people invest in wine that they feel comfortable. I record phone calls, get independent auditors to make sure the wine is insured and cared for.

“Provenance is essential when looking after and investing in wine. If you don’t take care, it will lose its value. You need to know where it has come from, where it is kept – it’s like an MOT for wine which investors can hold on to.”

What kind of wine do you invest in?

“The great thing about wine is it has received double digit growth on average every year since 1950. The top five châteaux in the world [known as first growth houses], Lafite, Mouton, Latour, Haut Brion and Margaux – have grown 100 per cent in profit in the last five years.

“We only trade in the top 30 listed wines, pardon the pun but it is a very liquid market, and whilst there are other beautiful wines out there, we wouldn’t recommend investing in them because we just don’t like the amount of movement in the market.”

Vin-X is growing very quickly by all accounts – how big is the company now?

“We have 30 people working for the company and we are now servicing around 850 clients. We have economists and analysts sitting next to wine investors and brokers. What makes us different is that we know where to look and what to research.

“It’s crazy at the moment, we are gaining five to 10 new clients a day which is remarkable in a recession. Entry level is only £2,000 so it is open to anyone really.”

“We offer contact with our clients – we’re the stock brokers of the wine industry. Instead of buying a share in a bank and getting no returns, people can come to us and get a contract, the right price, the certificate which shoes where the wine is kept – it’s just like buying a share.”

How does the business model work?

“We charge our clients fifteen per cent on their investments over the three years, five per cent per year”

Where is the wine kept?

“The wine is kept in bonded warehouse storage, so in effect it is in an offshore location as it is outside of VAT treatment.

“It means that you can get beneficial tax treatment of the asset – the same benefits that you would get with a share incentive plan – the tax implications are exactly the same.”

So why is now the time to invest in wine?

“There are a number of reasons, the first of which is that the market is currently in a correction or price drop. It happened after the collapse of Lehman brothers in 2008 as it had a lot of wine in its portfolio.

“There have been three of these corrections over the last 25 years and we are just came out of one now which makes it a good time to buy.  

“The second reason is the massive demand from the BRIC countries. Ultimately, when you buy a crate of wine you step out of the UK economy. The demand for these wines from the BRIC countries and the US is huge.

“If you consider that Latour made 16,000 cases of wine in its 2009 vintage, there just aren’t enough for the world’s billionaires to buy up – there are one million billionaires in China alone. Luckily I have three cases!”

So when did the interest from the BRIC countries start to gain momentum?

“In China it started in 2008 when they abolished import duty on alcohol. That had a massive effect on the market and we expect the same thing to happen this year with India.

“We found out that part of the India/EU trade deal set to go through this autumn will eradicate heavy tax on wine as part of the agreement.

“There’s a wine called Cos D’Estournel – the chateau is often referred to as “super second,” [meaning that it produces wines at a quality nearing that of the First Growth houses].

“One hundred and fifty years ago, 90 per cent was shipped directly to India and so there is a real flavour belonging to that wine and stickiness with the brand that makes it hugely popular in India. When we put our clients onto it it went up 32 per cent in value over night!”

So how long do these investments take to come to fruition?

“We say three years to our clients. We do get the odd investment that goes through the roof over night but generally we advise that you hold on for three years.

“There was a Lafite back in 2010 which we advised our clients on buying for 6,000 and the value had rocketed to 13,000 within six months.

“Wine critic Robert Parker has a massive effect on the market as well. What he says goes! Parker’s recent scores on the Bordeaux’s 2009 vintage gave a perfect score of 100 to 19 wines – which makes it one of the greatest vintages of all time.

“We researched it, put our clients onto the most lucr
ative wines and got it spot on – they made a lot!”

So what is next for Vin-X?

“The important thing for us is customer satisfaction and to make sure we have the qualified people to deliver it.

“We’ve been getting a lot of calls from Germany, Luxemburg and Holland, so I’m thinking of opening up in Luxemburg. It is excellent for getting to Germany and the Benelux countries so we thought it would be a good move – and of course we’ll benefit from the amazing French food.

“We are also thinking about Moscow. The Russians are really getting into wine and will be the next China when it comes to investment in it.”

Well best of luck with the move whenever it comes around!

“Thanks very much – you’ll have to pop around for some wine tasting…”

I think you’re probably right Peter!

 




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