A corking investment idea

If it works you can use your investment to celebrate. If it doesn't, you'll be able to drown your sorrows. Welcome to the bizarre world of fine wine investments.

by The Guardian

In the UK, homeowners are being offered a bizarre new way to manage their mortgage, based on investments in Bordeaux Wine. The scheme, called Home Cellars, is the brainchild of the firm Premier Cru Fine Wine Investments.

The plan is being touted as the first investment product aimed at repaying a mortgage where the money the borrower invests is used to buy cases of wine. The firm will manage their clients' portfolios of wine, buying and selling throughout the term of the mortgage, in the hope that by the end of the period the value of the wine will equal or exceed the value of the outstanding loan. If you are lucky, the wine will be worth considerably more.

And it's not such a crazy idea. Fine wines are an established form of alternative investments and in many cases perform more strongly than standard assets. Stacey Lea-Golding, investments director at Premier Cru, says a lump sum of £10,000 invested in a managed fine wine portfolio in January 1990 would have increased to £89,760 by January this year. That compares with the £39,145 that the FTSE All Share Index would have delivered over the same term, according to Lea-Golding.

The wine plan works in a similar way to an endowment policy, with the borrower taking out an interest-only mortgage and then paying additional payments into the Home Cellars plan. The money is used to buy cases of Bordeaux wine, which are stored in a bonded warehouse under the client's name. The value of the portfolio is then used to pay off the capital sum of the mortage at the end of the term.

Bordeaux wine is used, says Premier Cru, because "it has the most stable financial history of all the different wine regions in the world".

Source: Could bying a lot of this be the smartest way to buy a house?
By Rupert Jones
The Guardian, 21 July 2006

Review by James Curtis

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