Forget the bonds and get a glass - red wine is a winner in 20th century

Tue May 20, 2014 1:57pm EDT
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By Guy Faulconbridge

LONDON (Reuters) - Forget government bonds, fine art and even stamps: Red wine outperformed them all over the 20th century.

At least that is what research by a team of academics from the University of Cambridge, HEC Paris and Vanderbilt University, Nashville, Tennessee, shows.

The Warren Buffetts of the fine wine world could have earned annualized real returns of 4.1 percent from 1900 to 2012, beating government bonds, fine art and stamps, though British equities would have given annualized returns of 5.2 percent.

"You would have done nowhere like as well as equities but the returns are surprisingly high compared to the returns on cash or bonds," Elroy Dimson, visiting professor at the Cambridge Judge Business School, told Reuters by telephone.

"Life is a little unfair and wealthy people who buy these assets - in this case wine - if they keep half to drink and sell half, maybe the half they sell could pay for the half they drink," he said.

The research crunched the data from 36,271 transactions for five red Bordeaux wines - Haut-Brion, Lafite-Rothschild, Latour, Margaux, and Mouton-Rothschild - from the sales rooms of Christie's auctioneers and wine merchant Berry Bros. & Rudd.

Annualized real returns over the same period on British government bonds were 1.5 percent, 2.4 percent on art and 2.8 percent on stamps, according to data quoted in the research.

So did the academics get to try the Premiers Crus Bordeaux, which can fetch 8,000 pounds ($13,500) a bottle, as part of their research?   Continued...

A woman attends the Vivanda Taste the Med food festival as glasses of red and white wine are placed on a display table at Ta' Qali, outside Valletta November 6, 2011. REUTERS/Darrin Zammit Lupi