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From Peter Lunzer, Director and Wine Adviser, The Wine Investment Fund: I have written in the past about how wine as an investment really does generate healthy and sustainable returns if properly managed with due regard to risk and return. But how can we differentiate between fine wines that genuinely represent investment grade stock and those from which a return is rather less likely?

A wine that is of investment grade has, quite simply, three main characteristics: it is a high quality product, is of finite production and has global demand.

Given these parameters one could with justification assume that filling a cellar with, for example, Cloudy Bay Sauvignon Blanc would generate steady capital growth. This wine qualifies in respect of all the above investment criteria. A fourth characteristic, however, breaks the model:– there is a consistency of quality for each harvest that prevents demand growing for the wines of a previous vintage. Add to this a fifth aspect which is that Sauvignon Blanc is not generally deemed to improve with age and the wine will never rise in value. For investment purposes there must be exclusivity not only of the wine but also of the specific vintage and a generally acknowledged confidence that age will improve the quality of the wine.

It is not that one should neglect New World wines. There are some exceptional and delicious New World wines that have produced great financial returns. The reality, however, is that for every Grange Hermitage......................

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