Investing in Wine

While the broader economy tanked in 2008, then struggled through 2009, Michael Wigley’s investment fund earned 32.6%. In the same period Wigley made investors money, the Dow Jones Industrial Average lost 10% and the median home price dropped 4.1%, according to the National Association of Realtors. Wigley doesn’t run a Madoff-style Ponzi scheme. He buys and sells wine.

Is wine a good investment? “Yes is the short answer,” exclaims Wigley. Wigley runs Bacchus Partners, LLC, the first and only wine investment fund in the U.S. He calls wine, “a complicated asset class that’s knowledge based like art and other collectibles.”

But Wigley thinks he’s taken something complicated and made it simple, by developing a system to grade each wine. Developed over 25 years, the system looks at 25 different variables to forecast the likelihood of any bottle of wine increasing in value, maintaining its price or decreasing. So, for example, Wigley’s grading system gives a bottle of 1982 Chateau Lafite-Rothschild an A+. Wigley says it’s currently in its drinking window and he predicts it has 20 to 30 years life left in it.

When it first became available Wigley bought a bottle of 1982 Lafite for $29.77 a bottle. At the end of January 2010 he invested in more at $3,000 a bottle. He says it’s still a great investment because the 50-year average for fine wine appreciation is 15% per year. That means if that $3,000 bottle of Lafite is still drinking well in 30 years it could sell for $198,635.

It’s a shockingly large sum, and other wine aficionados say it’s not likely to cost that much. But consider this: those bottles Wigley bought in 1983 have appreciated at 18.6% annually. As he looks for the next 1982 Lafite, Wigley’s rating system considers the quality, quantity and distribution of the wine. “A wine can be great but if no one’s ever had it, it’s not a good investment,” he says.

He points to Kitchak Cellars’ 2005 Adagio, it won the Double Gold Medal at the 2008 San Francisco International Wine Competition. But it was made in small quantities. So even though it’s a great wine, Wigley would not call it a good investment because only a few people have tried it and it’s hard to get. Still he says, “I’ll pick up a few cases for the fund on the hope it gains value.”

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