Growing demand and scarcity saw the wines outperform equities and gold last year

Heady returns for Burgundy investors as index climbs a third

Investors in burgundy wines will be toasting their gains after the fine wines outperformed equities and gold last year.

The index that tracks the movements of the most actively traded wines from the Burgundy region on the secondary market, the Livex Burgundy 150, jumped 35 per cent last year, setting a record high in November, before falling back slightly in December. This compared with pound-denominated gains of 5 per cent for gold and a 12 per cent fall for the FTSE 100 last year.

Growing worldwide demand in wines from France’s Burgundy region has pushed prices to dizzying heights during the past few years. The scarcity of supplies from the region due to bad weather has also fuelled the increase in prices.

Interest from Asian buyers — including the Chinese, who had previously deserted the fine wine market after Beijing’s anti-corruption and austerity campaigns — has also been high, according to wine experts. Once solely focused on the top Bordeaux red wines, Chinese fine-wine buyers have matured and are diversifying into other producing regions, including Burgundy.

“Within the fine wine world, Burgundy is regarded as the final destination,” said Justin Gibbs, cofounder of Liv-ex, the online wine exchange. With more than 400 of the world’s largest wine merchants as members, the exchange’s indices serve as a proxy for the whole market.

The interest from oenophiles for burgundies has been such that auctions for the wines have been breaking records. Most recently, Sotheby’s auctioned two bottles of Romanée Conti 1945 at record prices — one for $558,000 and another for $496,000.

The momentum behind burgundies has meant that the Burgundy 150 has jumped almost 170 per cent since 2010, compared with a 19 per cent rise in the Livex Bordeaux 500 and a 7 per cent decline in the Liv-ex 100 broader fine wine benchmark.

However, there are signs that the market may be peaking, said Mr Gibbs. The number of burgundies traded on the secondary market, which has been rising since 2009, fell for the first time last year to 847 from 878 in 2017. If the broadening of the market has stopped, this could be an indicator that growth in the region’s share of overall fine wine trading has reached its highest point, according to wine experts.

While the high prices have brought more sellers to the market, pushing up the “offer” or the selling price for the wines, there are fewer buyers willing to chase prices up to these levels. “You’re running out of people who can pay the higher prices,” said Mr Gibbs.

The test for the market will come from the 2017 vintage, which is being marketed this month. After several years of poor harvests due to bad weather, that year’s production is set to be the largest since 2009.