Finance Monthly - December 2021

consistent and above the rate of inflation in different economic backdrops. Fine wine is an antidote to inflation In more recent times, fine wine can provide a substantial long- term hedge against an uncertain inflation outlook. As the global economy recovers from the COVID-19 downturn, ongoing government spending and high savings rates are unleashing pent up consumer demand, causing inflation to accelerate. For example, the US Consumer Price Index (CPI) hit 6.2% year-on- year in October, a 31-year high. UK inflation hit a 10-year high in October. Inflation surprises have triggered bouts of equity volatility as investors gauge possible shifts in monetary and government fiscal policies. Should a sustained rise in inflation take hold, major central banks could tighten policies quicker than expected, leading to a more volatile backdrop inmainstreamfinancial indices. This is where real assets, such as fine wine, can shine. It has a sustained track record of delivering positive, real returns over the long term that have outperformed the IMF’s worldwide CPI inflation rate. The unique benefits of fine wine investing Beyond the pure financial benefits, fine wine has a lot to offer. Investors’ personal passion in such investments, and indeed Cult Wines itself, goes beyond a physical financial transaction. Investing in fine wine allows access to, simply put, more opportunity: elite experiences; like-minded wine enthusiasts; the exploration of new grape varieties, producers and products. Investments at this asset class level are therefore both a personal and financial choice. Investors with Cult Wine Investments can gain access to fine wine markets from a lower base, slowly increasing their portfolio size over time, rather than buying big on their first investment. Fine wine investments can also bring flexibility, easily sold in variable sizes at different times, as and when needed. Wine is also unique as an asset class in the way that it can be consumed. The more fine wine that is consumed, the less supply of fine wine in the market, the higher prices rise. This trait distinguishes fine wine from traditional assets as well as many other alternatives and enhances its stability over long time periods. In addition to supply limitations, demand for fine wine goes beyond its benefit as a financial instrument. This does not mean fine wine is immune to downturns, however, as there is a significant continuous demand for the product itself, rather than just as an investment, wine can temper most negative price fluctuations. This analysis, paired with the former standpoint regarding wine investment as more than simply a financial exchange further demonstrates how fine wine investment really is surging ahead in investment potential. Technology driving ongoing expansion As demonstrated in the results of the Knight Frank’s Luxury Report, wine has seen impressive returns in recent months, rising 15% in the past year. Helped by improving technology, new producers and regions are gaining the attention of global buyers, driving the overall growth of fine wine investments. In 2020, the best performing regions within the Liv-ex 1000 were Italy, Rhone and Champagne rather than Bordeaux or Burgundy, which you’d imagine to be the traditional heavyweights in the market. What this indicates is that, much like a new entrant to theexchange,manycornersof the global fine wine market have yet to be fully discovered by a global audience, creating opportunities for alpha generation. These positive trends are set to continue as investors can expect to see returns on fine wine steadily rise as economic recovery continues and economies reopen. It’s ultimately a really exciting time for the wine investment market and a great time for those who are looking to begin investing in wine as an asset class, either to diversify their portfolio or simply because they love wine. It can provide great price stability against current inflation and is a ‘low-risk’ option for those who are unsure about alternative asset classes. Finance Monthly. Inve s tmen t 45