Art & wine investment can pay off, but there’s a lot to learn
Anybody who wants to be able to retire, or perhaps have an income after retirement, needs an investment strategy. Most of us put our money in the stock market one way or another, but it’s always a good idea to diversify. If your tastes run to the finer things, you might be interested in art or wine investment.
What to Know
The first order of business is knowing what you’re getting yourself into, so if you’re not already a wine or art aficionado, you’ll need to become one. Even if you’re into art or wine, you’ll want to do your homework before putting skin in the game.
If you want a return on your investment, find out which artists — active or deceased — have a track record of their work selling. Most estimates suggest that less than 1 per cent of art is ever resold. It’s definitely a top-end market, and scarcity is one thing that drives prices up. It’s unlikely you have a 13th-century Cimabue hanging above your hot plate unbeknownst to you and you probably don’t have the skills to uncover an unknown Rembrandt, so you’ll need a combination of smarts and cunning in regard to the art you choose. Has the artist fundamentally changed the medium? If so, that’s the kind of work that will appreciate in value. The National Gallery of Australia paid $1.3 million in 1973 for Jackson Pollock’s Blue Poles (aka Number 11, 1952), a record for a modern painting at the time. Now, however, the painting is worth more than $350 million. Pollock’s abstract drip style has been seen as revolutionary, which is why his works are so valuable.
With wine investment, you need to delve into which labels perform well historically on the resale market, and which vintages. Some growth years for particular regions are particularly celebrated, and prices are likely to be higher in a big anniversary year (decades, centennial, and so on). No matter what, you’re likely not going to see a return for five years, 10 years, or more. You’ll want to get to know not just the countries that are famed for their wines, but the particular regions in those countries that specialise in certain grapes — Shiraz in the Barossa Valley, Sauvignon blanc in Marlborough, etc. You already need to be able to store the wine properly. Different wines are better in different temperatures and humidities, and you want to keep them all out of the light.
Where to Start
For wine investment, Tamara Grischy of Langton’s Fine Wine Auctions recommends a vintner with a solid track record such as Penfolds Grange. “You would always look for something that is very stable and steady and something that is generally consistent with the vintage quality, and Penfolds across the board is a good brand to start because they’ve got a portfolio that has entry level, reasonably priced wines to the top level of the very expensive,” Grischy told Nest Egg. “You’ve got your Penfolds Grange which generally we can see — depending on the vintage quality — a 10 per cent growth in price per year in our market where you are buying back vintages.”
Grischy suggests buying direct to avoid fees, but if you’d prefer to have a guiding hand selecting wines for you, firms such as Amphora and Cult Wines can help choose a diversified portfolio that can be as aggressive as you like. Treasury Wine Estates, whose portfolio includes Penfolds and 19 Crimes, makes and sells wines with a focus on sustainability, including sustainable growth.
The fine art experts at Banziger Hulme suggest purchasing art that has a ready resale market and that investors buy at reputable auctions, galleries, and fairs. Taste is, of course, subjective, but you want to look for pieces of good quality and good condition. If those criteria are met, go ahead and buy what you like. You can find seriously good art for under $5000, Banziger Hulme say. Other things to consider are the value of other works by the artist and the popularity of the style. Again, diversification is key, especially as tastes in art can be fickle and trends shift. Consult with dealers and galleries such as Galeria Aniela, and get an appraisal of any piece you’re considering buying.
The Market
The wine investment market is valued at $400 billion worldwide. The majority of investment is in French wines, especially those from Bordeaux and Burgundy, and age is important. “There’s a huge market for mature wine, from restaurants and drinkers,” Stephen Browett, chairman of Farr Vintners, told Bloomberg. “People want mature wine — they aren’t in the market for the wine when it’s first released. We buy the wine back from investment customers and sell it to drinking customers. Private people find it to be a fantastically efficient investment.”
The global art market is smaller, but still represents about $95 billion. Most of those investment dollars are concentrated in high-end works, such as Leonardo da Vinci’s “Salvator Mundi,” which fetched nearly $650 million at auction in 2017, a record. It’s OK, however, to start small. The big difference between wine investment and art investment is that the wine is a liquid asset — it can be sold quickly and easily — whereas it’s tough to unload a piece of art fast.
Whilst you may make some money in the long term investing in wine or art, it’s OK if at the end of the day you get enjoyment out of a nice bottle of wine or looking at a beautiful piece of art. After all, what price can you put on living the good life?
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