A team from Stellenbosch University has combined finance and oenology (the science and study of wine and winemaking) to develop a fine wine index, a financial tool that is used to track the performances of wines in South Africa.
Financial risk management lecturer in the Department of Statistics and Actuarial Science Mesias Alfeus co-authored a paper with honours students Anton Blignaut and Jean-Pierre Viljoen that examines an investment model for excellent wines in South Africa.
The study is the first to examine the beneficial effects of wine on portfolio diversification and growth in the nation and it used five years of data on 30 fine wines to create an index featuring the country’s top 10 wines.
The index selects the top 10 wines based on liquidity, monetary value and the discerning palate of renowned wine critic Tim Atkin. This ensures that the chosen few not only hold financial weight but also boast consistent quality and appeal, recognised by a trusted industry authority.
“The combination of these three criteria guarantees that the top 10 wines in the index are both financially sound and respected for their quality, making them representative of the wine market’s dynamics,” says Alfeus.
According to Alfeus, this index is updated quarterly and offers investors a convenient and reliable way to tap into the world of fine wine investment.
However, the study acknowledges a unique twist that wine investment introduces: the temptation to indulge in your assets.
“The allure of consuming the very investments you hold can disrupt conventional strategies,” says Alfeus.
“This emphasises the need for a nuanced approach that considers not just the financial aspects, but also the behavioural and psychological dimensions of investing in assets that are both for enjoyment and investment.”
Considering 2 756 transactions, of which two thirds were for red wine, the wines that made the top 10 list are Sadie Family Columella, Kanonkop Paul Sauer, Porseleinberg, Klein Constantia Vin de Constance, Sadie Family Palladius, Meerlust Rubicon, Boekenhoutskloof Syrah, Vilafonté Series C, Sadie Family Skurfberg and Alheit Family Makstok.
The wines showed an investment return of more than 80% over four years, taking into consideration storage and brokerage fees.
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