Investment funds focusing on art and wine attract interest
By Ng Baoying, Channel NewsAsia | Posted: 24 September 2007 2130 hrs

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SINGAPORE : Investment funds focusing on art and wine have been attracting greater interest from among investors in the region, say industry players.

They say the recent volatility in the financial markets has further encouraged diversification into these alternative investments.

Wine may be intoxicating but so are the prices, particularly for the investment grade ones.

Tan Cheng Teck, Managing Director, Wine Growth Fund, said: "Wine prices have gone up roughly about 15 to 20 per cent in a year since 1982 to now. But in the last 3 years or so they've gone up more. This year alone, in the last 7 months, wine prices in general have gone up 40 per cent for investment grade wines."

Structured like a unit trust, the Wine Growth Fund buys investment grade wines directly from vineyards in Bordeaux.

The bottles are then stored in anticipation that their value will rise over time. They will then be sold for a profit.

The Fund says Bordeaux wines are highly valued.

Tan said: "It's basically demand and supply. These first growth vineyards have been zoned in 1855, so they've been zoned and they can't really expand. So production capacity has been limited and there's growing global demand."

Demand for wine has been growing in recent years, thanks to the rise of new consumer markets.

And with the nouveau-riche in China and Russia taking to wine in a big way, prices have been pushed up to as much as a few thousand euros per bottle.

For wine investors, they have every reason to raise their glass. The Fund says it has grown by 50 percent in terms of value since the start of this year.

It is also seeing greater interest among individual investors seeking to diversify their portfolios.

In the last 12 months, it saw 90 per cent returns compared to 14 per cent from the S&P's 500.

The fund has a minimum investment of 100,000 euros.

Apart from wine, investors have also been looking at other alternative investments, including watches, jewellery and art.

Edward Dolman, CEO, Christie's, said: "There have been a number of recent surveys that suggest over a period of time that investments in works of art seem to hold up in comparison to equities and bonds. And you know in certain categories if you get the right work of art at the right time, you can see really quite significant returns.

"So a lot of people are now looking at art as alternative investments, and we're seeing the growth of art funds. And banks and investment banks (are) putting together syndicates of people to invest in works of art."

According to Christie's, some contemporary pieces which sold for about US$200,000 four years ago are changing hands at US$7 million today. - CNA/ch