Against a backdrop of high inflation rates and a challenging environment, Jeremy Howard, co-founder and CEO of Cru World Wine, discusses why investing in fine wine is an attractive proposition. 

Fine wine, as an alternative investment, performs well in times of high inflation, acting as a hedge, Jeremy Howard at Cru World Wine, a marketplace for acquiring, trading, and managing fine wine and spirits, told WealthBriefingAsia in a recent interview.  

The company reported record revenues for 2022, with group revenues rising by 7.6 per cent to $51 million, as demand for fine wines in Asia and beyond surges.

“There is a lot of new wealth in Asia and there is a strong interest in fine wine, making the region very attractive,” Howard said. “The outlook also looks positive,” he added.

Based in Dubai, British-born Howard, previously a managing director and head of convertible bonds trading at Deutsche Bank and a convertible bond analyst at Goldman Sachs, co-founded the company in 2013. It now carries over 20,000 products on its platform with a market presence in Singapore, Hong Kong, the United Arab Emirates, the UK, the US and more.

He highlighted how fine wine is a long-dated asset, with the best vintages having a drinking life in excess of 50 years, making it useful for younger investors. “Younger people are also interested in sustainable and experiential products and investments. As a wholly natural product – they are mainly organic and even biodynamic – fine wines tick a lot of boxes in terms of sustainability,” he said. 

“The best time to buy is on release, when a new vintage is sold for the first time by the producer,” he added. “It also has a long-term track record of steady price appreciation with very low volatility. Since 1989, it has outperformed every major asset class (equities, bonds and commodities),” he said.

The main risks are provenance and condition. “That is why we advise our clients never to buy from auction houses, and to always buy from merchants like Cru,” he continued. It also needs to be stored in a professional warehouse. With client portfolios valued at in excess of SG$5 million ($3.8 million), he does not see these investors as 'hobbyists', but rather as highly sophisticated investors.

Outperforming markets
Since 2019, the firm’s total revenues have increased by 126.2 per cent. Trading volumes were also boosted by fine wine and whisky’s outperformance of mainstream assets during the year – the main fine wine index rose 13.4 per cent, compared with a decline of almost 20 per cent in the S&P 500, Howard continued.

Most recently, Cru saw an injection of almost $12 million in new liquidity for fine wines into its Cru Markets secondary trading platform. 

Aside from fine wines as alternative investments to combat inflationary pressure, Howard highlighted the benefits of incorporating fractional investing into a recommended portfolio.  

Still a relatively nascent trading model, especially among alternative assets such as fine wines, fractional investing opens up new streams of capital and liquidity into the asset class, given that it also allows exposure to the mass affluent segment, he said. This would otherwise have been limited, as fine wines were traditionally only accessible to high net worth individuals diversifying their portfolio due to its steeper starting capital.  

While the fine wine industry has been comfortable as a physical asset, market participants are now seeking ways to provide investors access to such alternative asset classes with higher entry points, he added. Fractional investing broadens the range of assets available for investing and can be extended to other alternative assets, opening up these markets to a wider pool of investors.

Beyond that, with market uncertainty at a high, he believes that even the safest of instruments such as bonds have not been spared. 

“Specifically, such ‘assets’ with no intrinsic value – and no alternative use cases – are riskier than what investors have been led to believe. As such, there is the need to keep wealth in tangible assets, especially those with strong use cases like fine wine and whisky,” Howard said. 

Incorporating artificial intelligence
The company also recently integrated artificial intelligence onto its trading and portfolio management platform, enabling its clients to engage with Cru’s AI function to find out more about its 17,000+ fine wines and spirits. Beyond the products, clients can fact check on 2,000+ producers and receive answers directly from the AI engine, ChatGPT, Cru said. Via a simple user interface on the Cru Markets page, users can type questions in any language and receive immediate natural language answers on screen.

Howard added: “Knowledge about fine wine should not be locked up and accessible to only a select few. This initiative gives everyone access to the knowledge of an AI engine which just passed all three levels of the notoriously hard Court of Master Sommelier’s written exams.”

The new AI interface on Cru Markets is 100 per cent free for use among Cru’s clients, with no limits on how many questions can be asked. It is available on Cru’s local platforms across its markets in Singapore, Hong Kong, the United Arab Emirates, the UK and the US.