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15/01/2018

Thoughts on portfolio management

by Giles Cooper (Head of Marketing & PR)
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The Price of Everything and the Value of Everything

There are many reasons people collect wine.

  • The romance of ownership.
  • Planning for future drinking pleasure.
  • Pure investment.

These are just a few – and when you factor in that humans are often obsessive hobbyists and collectors (especially the British contingent), it’s not hard to see how many people end up with more wine than they need.

This is nothing new. Whether it was a question of getting a better price for buying more, or building up allocations to make sure that they were secure for when the sublime vintages came around, serious buyers have always bought more than they could drink. For many it was a case of ‘some to keep, some to sell’ and for many this holds true. The principle of this is absolutely fine but in practise it brings one serious challenge – the process of selling the unwanted portion.

Merchants have always listed prices you could buy at. But selling prices? Typically only available on application, and subject to all the usual teeth-sucking and head-scratching. Imagine you’ve been sold an investment, and when the time comes to cash out, it’s all “the market’s a bit sticky right now… not much demand for that… don’t really have the cash to tie up in stock I don’t want… I suppose I could give you 20% under the current sell price…”

Any of you who’ve bought and sold wine through traditional means don’t have to imagine too hard; you’re bound to have experienced this kind of nonsense. Not only is it a hassle, it muddies the water. The lack of visible sell prices removes a key investment principle, namely the ability for you to know what your wine is really worth – because as we all know, something is truly worth what someone else is willing to pay for it, not just what its replacement value is. The key therefore is to find an accurate valuation and if possible, a live bid, immediately executable, leading to a guaranteed sale – preferably at a great price. Sounds impossible, doesn’t it…?

It’s not. BI’s LiveTrade platform provides the only live bid in the market – a guaranteed sale price and volume – for over 470 top wines including Bordeaux, Champagne, Super Tuscans and a host of other treats. As well as guaranteed liquidity, there’s instant execution and we always aim to pay within 2 weeks of receipt of stock (it usually happens faster than this). It’s accessible to anyone, not just merchants, and available 24/7, 365 days.

If your wine isn’t on LiveTrade, help is still at hand. We have created a live valuation system that uses an algorithm built by our team of in-house experts which enables you to get a reliable market price for your wine. For the vast majority of wines, the confidence level will be high enough that you can instantly broke the wine via our website for a 10% fee. For anything a little more obscure or rare, whilst the algorithm will generate a valulation, we’d prefer to sense check that price through our purchasing team. For those of you who prefer to spread your storage around various merchants, all is not lost. In the coming weeks we’ll be adding the ‘virtual portfolio’ system which will enable you to upload the list of wines you store elsewhere and take advantage of both the valuation and the LiveTrade bids and offers.

But hang on: are we fixing something that ain’t broke? Because not everyone is ‘an investor’ – and all wine goes up in value over time, right? Well, only in the same way that all cars can drive to the shops, but you wouldn’t put a Fiesta on a racetrack with a Ferrari.

A person who has three children born in 1982, 1983 and 1984 and buys a case of Latour en primeur for each, to be gifted on their 21st birthday, only ends up with one happy child. This is a flippant way of saying that there is probably plenty of wine in your collection which has done almost all the appreciation work it is likely to do – and whose value could be far better reinvested in another case which has another lifetime of appreciation still to come.

The bottom line is that you don’t have to be ‘an investor’ to want to maximise the potential of your collection, whether to increase its value, or simply makes its contents more relevant for your needs.

So where to start? Well, a new year brings new opportunities so the best thing is to begin with a really fresh look at your wine collection. Be ruthless: anything you’ve got more of than you know you’ll want to drink should be marked ‘under consideration’. Of course, if you store with BI you’ll have access to your Reserves online, where you can check the live valuations and your % return on each wine. If it’s a LiveTrade wine (marked with the LT symbol) then you’ll be able to sell instantly to us through the platform. If it’s not, you can broke it immediately – just set your price and it will be on the website for sale within 10 minutes and flagged to our sales team on a daily email.

If you don’t store with BI you can still use the LiveTrade platform for buying and selling; it will just take a little longer for the money to hit your account, as the wine has to be transported and then condition checked as part of the goods received process. While we’re on the subject, we do believe that our warehouse provides the best long-term storage in the wine business, and not just because of the valuation and broking benefits it brings: it’s the most secure, up-to-date storage facility in the business and charged at a very competitive rate. Our Reserves Manager Lewis Byrne is happy to answer any questions (he’s positively obsessed with the warehouse).

If you decide to join in you’ll be part of a happy band who have recently discovered the fun and satisfaction to be had from actively managing your portfolio. In 2017 we had a record year for LiveTrade users, with hundreds of clients making well over a thousand online trades totalling north of GBP 6m, a 250+% increase in the total value of online trades versus the previous year. This also made up a record proportion of the total LiveTrade turnover, which topped GBP 60m in 2017.