In Vino Lucrum

If drinking wine boosts your physical health, then perhaps investing in wine will restore your financial health. That’s the goal, at least, of a new Minnesota-based investment vehicle, the Fine Wine Appreciation Fund 1.

The Wine Fund closed in October with $3.3 million from 23 investors, predominantly Minnesotans. Its general partner is Orono-based Bacchus Partners (bacchuswinefunds.com), whose principals, Mike Wigley and Brian Jackson, have had long careers in the Twin Cities: Wigley as CEO of Great Plains Companies, a construction-industry holding company (he’s also founder and chairman of the Minnesota Taxpayers League); Jackson as a serial med-tech executive and now president of Bayside Capital, a consultant to early-stage med-tech businesses. Wigley also describes himself as a “passionate collector for the past 25 years with a personal wine cellar of 18,000 bottles.”

Why invest in wine? It’s yet another asset class for investors seeking diversification. But not for short-term trading profits, rather for long-term price appreciation, says Wigley. Prices in the worldwide fine wine marketplace are tracked by the London International Vintners Exchange (liv-ex.com). Annual compound growth rates for fine wines were about 35 percent from 2004 into the fall of 2008, according to Bacchus Partners’ marketing materials. However, with the falloff in asset prices worldwide lately, the Liv-ex 100, the most recognized wine index, ended up declining almost 15 percent for all of 2008.

With its $3.3 million, Wine Fund 1 expects to buy about 9,000 bottles of wine, according to Jackson. “The wines will range in price from $40 to $10,000 per bottle, or an average price around $375,” he says. Buying decisions flow from the fund’s proprietary analytics, which feature 25 different factors. Among them, Jackson says, “Where is a wine on the drinkability curve? What is its Parker rating?” from Robert Parker, regarded as the world’s most influential wine critic, and after the wine is bottled and aged, will that rating improve—“Is an upgrade coming?”

Bordeauxs and Burgundies are getting emphasis so far. The biggest share of the fund’s wines—almost 26 percent—come from the Domaine de la Romanée Conti (generally known as the DRC), an estate in the Burgundy region of France. The lone American label on its top 10 list is Screaming Eagle, an Oakville, California–based vineyard. The only other American vineyard with investment-grade status is the Harlan Estate, also of Oakville, according to Wigley. Other “portfolio” highlights include 1990 Château Petrus, 1986 Château Lafite-Rothschild, and 1989 Château Haunt-Brion.