Investing in the noble grape is not always a path to riches but a firm operating in this space is tapping into Asian demand by creating a Hong Kong office.

UK-headquartered Cult Wines, a firm investing in and collecting fine wines, is to set up a new office in Hong Kong to tap into Asian demand, already a noted trend in this corner of the alternatives and collectibles space.

Asian investors have – albeit with some fluctuations amid worries about the mainland Chinese economy – been significant drivers of the global market for wines from regions such as Bordeaux and Burgundy, for example. Cult Wines says that of the $352 million of wine sold at auction in 2014, $104 million, or 30 per cent, was accounted for by Hong Kong alone. By 2024 it is predicted that China will boast nearly 15,700 ultra-high net worth individuals and 338 billionaires – with a presumed thirst for “trophy assets” such as fine wine.

Explaining its confidence about Asian demand, Cult Wines said it sees “strict limitations on supply and rising demand from wealthy buyers in Asia”. 

The market has not been without recent pullbacks, however. The Liv-ex 100 index, which is a widely-cited benchmark of auction prices produced by London’s Liv Ex exchange, rounded out December 2015 up by a mere 0.7 per cent, not quite sufficient to take the index higher from a year before. It dropped from 238.50 to 238.26. The narrower Liv-ex 50 (which tracks the first growths) was flat on the year. The market had recovered slightly from soft performance in the summer. For some periods, wine prices have outperformed those of mainstream equities – triggering interest from investors. A number of firms operate in the wine investments space, such as Berry Bros & Rudd, for example.

Founded in 2007, Cult Wines manages private client and trade client portfolios for more than 1,800 clients across 55 countries. Assets under administration are around £30 million ($43.9 million) with the firm aiming for sales of around £25 million next year and £50 million by 2020 (2015 sales: £17 million).

To some degree, fine wines as a “passion investment” are seen as on a par with fine art, classic cars, jewellery and watches as items desirable both for their prestige value and hedging qualities against inflation and economic uncertainty, although debate remains as to how much they genuinely diversify investment risks. 

“We see targeting the Hong Kong and China market as a natural extension of our current growth plans and this will certainly help us to consolidate our services to a growing client base in Asia,” said Tom Gearing, managing director at Cult Wines.