Wine Investing Platforms

John_Morris · September 9, 2020, 2:47pm

Man, there are so many red flags here! So much BS!

Our worldwide market access ensures the price you see in your portfolio is the price you receive when you sell.

Vinovest is insured with an FDIC equivalent for wine, protecting each bottle against breakage and loss.

So government-backed wine insurance?

Rhône led all regions with a 2.93% return. The region has gained market share in recent weeks and features three of the top ten performers on Wine Searcher. The 2011 vintage of Chapoutier Ermitage Pavillon set the pace with a 127% return, the best performance of any wine in the quarter. Rhône had four more wines achieve at least 40% growth from Domaine Jean Louis Chave, Beaucastel, and Vieille Julienne. (> Vinovest Q2 2020 report> )

That Rhone return is based on their index of just 10 wines. Though they tout the gain in Chapoutier and three other wines, one can deduce by simple math that the other six index wines showed an average loss of 36.5% in the quarter.

They kind of bury the fact that Vinovest’s return in the second quarter of this year was 1.4%, versus a 25% gain in the S&P500.

John_Morris · September 9, 2020, 2:50pm

I was wondering when people on the board would start talking about this! I searched for discussion of Vinovest here months ago and didn’t find anything. I’m interested to hear people’s opinions. I’ve included the fee information below (as found in the FAQ on the Vinovest webpage). My partner exchanged some emails with the CEO and has already invested, and I was planning to as well unless you convince me otherwise

We charge a 2.85% annual fee for all of our services, which gets reduced to 2.5% when your portfolio balance exceeds
$50,000. This includes wine buying, wine fraud detection, storage, insurance, and selling as well as active management of your portfolio. Although this may seem high when compared to traditional assets, wine investors who do not use Vinovest frequently find themselves paying 10 to 15% of the value of their portfolio every year on these costs. Vinovest’s fee is prorated across the year based on the average balance in your account, and a portion of this is charged monthly.
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While fees are higher than for most other investments, they seem potentially reasonable to me given I’ve heard offsite storage is about $2/bottle/year. I’ve never invested in wine in any way (merely a drinker of wine up to this point) and I know it’s a more speculative investment, but it seems like it could be an interesting diversifier and the fees might be reasonable for the investment type. You actually own discrete bottles in their model rather than proportional shares, so it’s not as diversified as the mutual fund type models, but if nothing else you can always have the bottles of wine for yourself to drink. Any thoughts from those more experience in buying (and potentially selling) wines on the prospects of this as an actual investment strategy? Also, for anyone who’s interested, my partner does have an invite code that gives 3 months free. I’m planning to use it when/if I sign up to get the free months. Feel free to pm me if you’d like to use it.

What’s your connection to Vinovest? I suspect it’s more than just that having a partner who invested. (I note this is only your second post.)

Marc_Hauser · September 9, 2020, 2:53pm

Perhaps we could do total return swaps, bundle them, tranche them out, wrap them with insurance, bundle those into a single tranched product, and then have the first synthetic wine CDO squared.

Victor_Hong · September 9, 2020, 2:54pm

John, I am utterly shocked with your skepticism. This sounds like a “AAA” investment.

Victor_Hong · September 9, 2020, 2:55pm

What is a CDO?

Jay_Miller · September 9, 2020, 3:07pm

Clareterized Debt Obligation

Victor_Hong · September 9, 2020, 3:40pm

How many can I buy at par, after I check with my financial advisors?

ChrisL · September 9, 2020, 3:51pm

It seems like such a bad idea that I want to throw the $1000 minimum at it and see how fast it takes to go to zero!

John_Morris · September 9, 2020, 3:54pm

It’s interesting that they lowered the minimum investment from $5,000 to $1,000. Not enough takers at $5K?

Victor_Hong · September 9, 2020, 3:59pm

If the investors have direct, physical ownership, would this minimum mean that a highly appreciated trophy bottle then be physically split among them, for redemption settlement? Coravin to the rescue…

Jason_T · September 9, 2020, 4:27pm

Wine is a very poor candidate for this type of investment. I’ve run mutual funds and hedge funds as the primary portfolio manager so know a little about the business. I did not find that FAQ and am not goign to give my email out. But wien is illiquid and imagine the liquidy is poor, maybe monthly. I am not sure how that mark or value the assets and with any hedge fund type vehicle that gets tricky and is rife with potential issues.

I doubt they really get any significantly special pricing and in fact the whole pitch look pretty fluffy. And a key point here is the only returns that matter are how the fund did assuming it was of adequate assets (over 25 million) to have any hope of being repeatable/meaningful. Many new funds quote actual returns but with tiny assets as to make them near meaningless. This assumes the valuations are accurate and include liquidations as that ensure that the valuations and interim pricing are consistent and accurate. The turnover ratio will tell ya how much has been actually sold but be sure that does not include physical wine delivered to the buyer.

Looking as some index return is pretty much meaningless given the large adjustment in wine prices so your starting point is going to matter a lot. This is why the actual funds returns are what matters and again if the assel pool is sufficient. It is still not to hard to make good returns if you get a few cherries and then value them. But to do this is size is a whole different matter.

I have certainly seen worse investments but would not touch these things for the reasons mentioned above.

The other thing that jumps out at me - which you’ll absolutely get based on your past experience - is that this isn’t really a ‘fund’ as such. Each person has ‘direct ownership’ of their wines and the marketing fluff is all about ‘bespoke investments’. To the extent that’s true I’d think that would spike maintenance costs and eat into any returns, much moreso than if this was truly structured as a ‘fund’.

Lee_Barnard · September 9, 2020, 4:52pm

Wine is a very poor candidate for this type of investment. I’ve run mutual funds and hedge funds as the primary portfolio manager so know a little about the business. I did not find that FAQ and am not goign to give my email out. But wien is illiquid and imagine the liquidy is poor, maybe monthly. I am not sure how that mark or value the assets and with any hedge fund type vehicle that gets tricky and is rife with potential issues.

I doubt they really get any significantly special pricing and in fact the whole pitch look pretty fluffy. And a key point here is the only returns that matter are how the fund did assuming it was of adequate assets (over 25 million) to have any hope of being repeatable/meaningful. Many new funds quote actual returns but with tiny assets as to make them near meaningless. This assumes the valuations are accurate and include liquidations as that ensure that the valuations and interim pricing are consistent and accurate. The turnover ratio will tell ya how much has been actually sold but be sure that does not include physical wine delivered to the buyer.

Looking as some index return is pretty much meaningless given the large adjustment in wine prices so your starting point is going to matter a lot. This is why the actual funds returns are what matters and again if the assel pool is sufficient. It is still not to hard to make good returns if you get a few cherries and then value them. But to do this is size is a whole different matter.

I have certainly seen worse investments but would not touch these things for the reasons mentioned above.

The other thing that jumps out at me - which you’ll absolutely get based on your past experience - is that this isn’t really a ‘fund’ as such. Each person has ‘direct ownership’ of their wines and the marketing fluff is all about ‘bespoke investments’. To the extent that’s true I’d think that would spike maintenance costs and eat into any returns, much moreso than if this was truly structured as a ‘fund’.

Think zero chance it is an actual fund (or they didn’t receive any securities/40 Act/FINRA/blue sky advice). Then again, sounds like buying a portion of an orange grove and entering into a service contract (especially with all the investment, portfolio, return, etc. language).

John_S · September 9, 2020, 5:03pm

Unfortunately many people call things like this Funds. I see no way this could be a 40 act (ie mutual fund) just due to the lack of liquidity in the assets. I just looked over the web site again which is quite unimpressive group of folks in terms of wine and running commingled products. Only the advisors seems to have real wine experience. Not that, IMHO, it takes a ton of expertise to pick wines to store, hold, and then liquidate. It does take experience. The main people listed are “serial entrepreneurs” which to me pretty much says it all.

Being able to take physical delivery is one of the few things I like in the structure. Most don’t know that many hedge fund (see that name again) actually have the option on a fund winddown to delivery the physical assets. Rarely used but often there. But here it sounds more like a private wine buyer type of thing maybe.

Their line about insurance similar to FDIC I find quite mis-leading which also tells me this is not that regulated.

Jay_Miller · September 9, 2020, 5:13pm

It sounds similar to what BI Wines in London does. I buy wine from them but don’t invest so I have no idea what sort of returns they’ve had.

matthewgoldman · September 9, 2020, 5:31pm

I saw that Rally just started into Wine as well. They have been doing cars and sports memorabilia.

It all looks fun, but the best part about owning a classic car or a great bottle of wine is knowing you can also ENJOY it. I can drive my car and maybe it will gain (or at least not lose value).

Wine, I haven’t had the patience to collect for too long yet, but I’m working on it.

Victor_Hong · September 9, 2020, 5:37pm

Who the flock wants to pay somebody 2.5% annually, to select 1987 Cos d’Estournel as either a drink or investment?

HenryB · September 9, 2020, 5:41pm

BI Wine dont charge an AMC, or anything like that. They’re a normal wine merchant, typically making their money on margin when they sell wines, or taking commission when they broker wine transactions. They just put more of an investment spin on it than other merchants.

HenryB · September 9, 2020, 5:41pm

or pay $400 for a bottle of 2016 Climens…

EvanLodes · September 9, 2020, 6:33pm

WB should sponsor a new crypto called WineCoin. People who just want to speculate on something called wine can throw their money that way. if it ends up being worth something, the board can sell some and have a Champagne party. If it doesn’t, who cares, but at least it will have diverted “investing” money away from the actual physical product that some of us would rather seen enjoyed and consumed…

HenryB · September 9, 2020, 6:47pm

I’d be interested to be told (and explained why) if I’m wrong, but I’d assume wine investing has really helped Chateaus to invest in their infrastructure and is at least partly responsible for the increase in quality and consistency in recent years?