TDN Weekend December 2016 Issue 9
Issue link: https://www.e-digitaleditions.com/i/1045316
Screaming Eagle. Investment-grade wines are general- ly produced in small quantities (up to a maximum of 20,000 cases), and with many inevitably consumed, this will drive up prices over time. Does that mean wine investment will have guaran- teed returns? "Volatility is low," Hammond says of the market. "The only type of volatility we really get is currency-based, that's it. When Brexit happened, the pound dropped in value, and investors from abroad started buying wine in pounds, so that drove prices up for people in the U.K. But we'll build the customer's portfolio around the market conditions." There can occasionally be unusual activity in the mar- ket that sparks a huge increase, however, as Hammond recalls a few years ago. "In 2008, Hong Kong abol- ished import duty on wine, so you had this incredible surge," he says. "Asia bought around US$1.5 billion of wine, and our investment universe isn't really that big, around 100 châteaux, and our core is less than 50… But I remember 'Lafite' is similar to a word meaning 'luck' in Mandarin, so that spiked. And anything that had a lucky number in it, like a No. 8. "But generally, good vintages are a driver. If you have a great one in Bordeaux or Burgundy, that's re- ally what you need. Good vintages tend to have high production, because of the weather, but for bad vin- tages it will be smaller. Also, Burgundy makes so little wine, just 600 cases a year, and that isn't enough to fill the global consumption demand, so the numbers there are very small. Going back 10 years, people bought the leading wines of Bordeaux and that was it, but now it's becoming a real trader's market."