Wine Investment in South Africa - Cape Wine Academy

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decisions and thus have little or no say in how funds are spent or what is traded. Many companies charge around 1.5% a year for their services, a ‘management charge’, often with an initial ‘subscription fee’ of some 5% and initial investment can be quite high; the Wine Investment Fund, for example, has a minimum investment of £10,000 (R110,000) and £500,000 (R5.5million) for institutional investors. Premier Vintners recommend an initial minimum of £5,000 (R55,000). In addition, some funds charge a ‘performance fee’ which is deducted from any profits realised on the maturation of the fund’s term, which is usually 5 years. Luxembourg based company ‘Wine Growth Fund’ has a minimum entry purchase of R1.2m, an annual management fee of 2.5% and a performance fee. The Wine Investment Fund charges 20% on returns realised. Using the Wine Investment Fund figures, it is possible to assess the returns on a typical investment, achieving say, 10% p.a., again converted to Rand for ease of comparison; Initial investment R110,000 Minus subscription fee 5% R5,500 Amount invested year 1 R104,500 Year 1 growth (compound 10% ) R113,225 -1.5%management fee R1,724 Year 2 growth R122,680 “ R1,867 Year 3 growth R132,923 “ R2,024 Year 4 growth R144,023 “ R2,193 Year 5 growth R156,048 “ R2,376 Investment return year 5 R156,048 Minus 20% performance fee R9,209 Net investment return R146,839 Thus, over a 5 year investment at a conservative growth of 10% compound per annum, the investor would pay R24,893 in fees and realise a net profit of some 33% or 6.6% a year. For a healthier growth of 15% compound per annum ( a stated industry average ) the investor would pay R34,220 in fees and realise a net profit of some 61% or 12% a year. The Wine Investment Fund admits, ‘each portfolio needs to generate approximately 1.2% compound growth per month ( 14.4% per annum ) to achieve target net of fees and expenses’. 17
For the top châteaux, returns have averaged 18%, which would see the investor pay some R42,750 in fees and realise a net profit of 81% or 16.2% a year. These are solid returns but note that costs paid by the investor over 5 years vary between 22% and 39% of the initial investment and some charges eg management fees, would still be due if the portfolio was not achieving such positive returns. Many investment companies have exceeded the above figures, some quite spectacularly, at least on paper. Albany Portfolio Management, a partner of Albany Vintners in the UK and only established in 2009, reports that their customers’ portfolios appreciated by an average of 58.9% in 2010, based on Liv-ex price reports. An examination of their 2010 market report shows exceptional price increases for several wines – most noticeably Château Le Pin ’01 whose annual compound growth was over 220%. Table 6 shows selected wines from an investment portfolio of some £184,000 Performance data: 12 months March 2009-Feb 2010 (£) Wine From Opening¹ Market² % Months Monthly Annualised APM Price Price Now Change Growth % Growth % (compound) ( compound) Ausone 99 Jan ’10 3,700 3,772 1.9 2 0.97 12.3 Ausone 08 Jul ’09 7,200 7,794 8.3 8 1.00 12.7 Cheval Blanc 00 Nov ’09 6,600 8,207 2.4 4 5.60 92.2 Lafite 01 Oct ’09 3,800 5,020 32.1 5 5.73 95.1 Lafite 04 Nov ’09 3,850 4,984 29.5 4 6.67 117.0 Lafite 08 Jun ’09 3,250 5,390 65.8 9 5.78 96.3 Latour 96 Mar ’09 5,000 6,030 20.6 12 1.57 20.6 Le Pin 00 Aug ’09 23,000 26,287 14.3 5 2.71 37.8 Le Pin 01 Nov ’09 14,000 20,671 47.6 4 10.23 221.8 Le Pin 04 Aug ’09 7,800 14,001 79.5 7 8.72 172.2 Margaux 90 Nov ’09 7,700 9,208 19.6 4 4.57 71.0 Mouton 08 Aug ’09 1,850 2,641 42.8 7 5.22 84.1 Petrus 08 Sep ’09 18,000 21,840 21.3 6 3.28 47.3 ¹ excludes management fee ² average prices reported on liv-ex Table 6. Albany Portfolio Management 2010 price and growth review of selected wines 18
Page 1 and 2: Wine Investment in South Africa Dav
Page 3 and 4: Acknowledgements The following all
Page 5 and 6: Contents Acknowledgements………
Page 7 and 8: List of Tables Table 1 Key investme
Page 9 and 10: 1.2 Scope of Assignment Wine invest
Page 11 and 12: The barriers that seem to exist whi
Page 13 and 14: meet future market demand. The 1855
Page 15 and 16: after seller’s premium ) giving t
Page 17 and 18: Hence the growth of dozens of inves
Page 19 and 20: Table 5 above shows an even more im
Page 21 and 22: Thus 1 case brokered personally or
Page 23: would avoid the need for the invest
Page 27 and 28: ‘bargain’ prices. This requires
Page 29 and 30: Ratcliffe, though, believes that,
Page 31 and 32: 2e) buying through an investment co
Page 33 and 34: worldwide and hugely increased the
Page 35 and 36: 6.1.2 Securing a release price High
Page 37 and 38: Other vintages should be considered
Page 39 and 40: Indices Level MOM YTD 1yr 5yr Liv-e
Page 41 and 42: may be legally more deserving than
Page 43 and 44: Even with the best intentions, wine
Page 45 and 46: Ullages (Level of Wine) For Bordeau
Page 47 and 48: Section 2 Chapter 7 7.1 South Afric
Page 49 and 50: people distrust wines of age and do
Page 51 and 52: 8.2.3 Domestic recognition of SA fi
Page 53 and 54: ‘It would be depressing indeed to
Page 55 and 56: some top producers do not enter the
Page 57 and 58: found in numerous bottle shops - an
Page 59 and 60: cR50,000 in SA or an underground ce
Page 61 and 62: The need for investment from abroad
Page 63 and 64: Krige is selling previous vintages
Page 65 and 66: ‘South Africa may not have as muc
Page 67 and 68: found an even more serious lack of
Page 69 and 70: important to establish to the world
Page 71 and 72: cases the CWG wines achieved higher
Page 73 and 74: ecession. Table 16 below shows wine
Page 75 and 76:
seeing négociants make huge profit
Page 77 and 78:
wine market. De Toren’s will be m
Page 79 and 80:
For this reason, savvy investors mi
Page 81 and 82:
Section 4 Summary and conclusions T
Page 83 and 84:
References 90pluswines. (2011) http
Page 85 and 86:
Goode,J. (2009) http://www.wineanor
Page 87 and 88:
Norman, R. MW (2011) Chenin Challen
Page 89 and 90:
Van Rensburg, A. (2011) The Big 5 S
Page 91 and 92:
Appendices Appendix A Interview wit
Page 93 and 94:
CT has still got 2/3rds of the fore
Page 95 and 96:
We were one of the first to offer e
Page 97 and 98:
There is no way forward for SA wine
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