The Financial Times spoke to two leading figures in the wine fund industry—which is all of 20 funds around the world—to find out why some of the leading funds have been closed or fallen under the heavy hand of regulators. Andrew Davison’s Vintage Wine fund peaked at around $150m in AUM just before the credit crisis:
“The wine market is dead. It could take years for this market to recover,” says Mr Davison. “I think you have to ask whether open-ended structures are suitable for these sorts of illiquid investments. There’s also a danger that wine funds can get too big. When you allow investors to come in and exit on a regular basis, you get huge outflows when things go bad.” […]
Justin Gibbs, co-founder of Liv-ex, says: “Wine funds are still a game in their infancy.”
But the market holds appeal, especially for wealthy Chinese, who just a few years ago were responsible for driving the price of fine French wines to record highs.
According to Mr Gibbs, the performance of wine, which is worth about £6bn per year as a global market, has been “very lacklustre” since June 2011, when the market turned after a strong two-year run. The best bordeaux vintages tend to fare better than burgundy, but on the whole the market remains weak.
The Wine Fund Market Brought to Its Knees (Financial Times)