Martin Flanagan: Investors turn to wine after Brexit

Every cloud has a Sauvignon lining. More than one in four wealth managers and independent financial advisers say they expect wine investing to rise over the next year as Brexit concerns see investors searching for havens from the 'storm'.

Investors are turning to wine in search of better returns. Picture: John Devlin
Investors are turning to wine in search of better returns. Picture: John Devlin

Some storm, some would say. The Footsie blue-chip equity index is up 17 per cent since the initial Brexit selloff in late June and all-time highs are not a distant horizon.

Among second-tier stocks, the FTSE 250 index is about 20 per cent above its post EU referendum lows. Even so, and allowing for some talking their own book by Cult Wines, a specialist in the acquisition and investment management of fine wines that has done the latest research, there is some current and historical evidence of the sector coming into its own amid various types of volatility.

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Since the UK voted to depart the EU nearly two months ago the industry reference point – the Liv-ex Fine Wine 100 index – has risen 3.6 per cent. That is the biggest positive monthly movement since November 2011, when we were still in the aftermath of the financial crisis.

Which brings us to another point about wine’s sometimes surprising resilience as an asset class. When the European Commission cracked down on banking bonuses in the wake of the crash, City headhunters said that one way the industry tried to circumvent the onerous new rules was to have bonuses paid in the likes of superior wines, gold, historical coins, etc. They are all assets that tend to improve in value with time.

So it is far from unfeasible that Brexit and what could be its lengthy implementation over two years and more may encourage investors to seek shelter from a widely expected busting of the current equities bubble.

The Liv-ex Fine Wine 100 index is at its highest in three years. The week following the EU referendum vote Cult Wines’s trade sales more than doubled the pre-Brexit average in June.

And it is not about peanuts (or olives, cheese and crackers). The sector is worth $4 billion a year. Where it goes over the next 18 months or so may well be a proxy for what Brexit brings to the UK economy and stock markets.

Assets in the cellar may come into their own.