The whole world is talking about Sipps (self-invested personal pensions). In theory, come next April, wine will qualify as a Sipp investment, and you’ll be able to put it in your pension and have it considered an investment as worthy of tax relief as an equity or bond is now.
As with all these sorts of government initiatives, the devil will be in the detail – exactly how all this will work is not entirely clear. What is clear, however, is that these upcoming changes to the list of Sipp-allowable investments lend a good deal of legitimacy to fine wine as an asset class.
Since July this year, and most notably in September, the market has (for some wines) been very strong as investors anticipate rising demand and prices from April. This has all been helped along by some fairly loose comments from one or two merchants, coupled with poorly researched articles in the mainstream financial press.
But whatever the reasons, wine has been the focus of attention and the result has been staggering. The best wines in the best vintages leapt in price from July to September, for example: Mouton Rothschild 1982 is up more than 30%, as is Lafite Rothschild 1986.
Whether such dramatic moves are sustainable is difficult to say, but we do know this: stocks of the best (and worst) wines from the 1980s and early 1990s are rapidly drying up, despite the fact that ‘A’ Day (the day of the launch of the new Sipps rules) is still five months off.
But if the Sipp-related demand for wine is still in its early stages, what will move next? Price movement has so far been restricted to 10-15 great wines, with the second and third growths largely left behind. These could well play catch-up in the coming months.
As the bull run continues, the market will look for value outside the big brands. First in the second and third growths, then on the right bank, and finally it will spread to other regions, particularly in France. The Claret Chip Index has moved up 12% year on year. Add in the market’s other wild card – that demand from price-insensitive markets such as China and Russia is rising fast – and it seems this market has further to go.
Justin Gibbs is director of Liv-ex.com