Knight Frank Fine Wine Icons Index update

2016-03-03

Two years ago, we introduced the Knight Frank Fine Wine Icons Index (KFFWI Index), created exclusively for Knight Frank. The KFFWI Index reflects a representative basket of the world’s 40 most iconic wines, drawn from key regions of production.

The Knight Frank Fine Wine Icons Index (KFFWII) - made up of many of the world’s most sought-after and trophy wines - is up 85% in the last 5 years, outperforming the Wine Owners 150 (market tracker) index by 50%.

Over a 10 year period, the index has grown by 250%.

Bordeaux on the rise

With new collectors coming into the market in greater numbers, and a year of solid if unspectacular gains under Bordeaux’s metaphorical belt, the market appears set for another year of single digit rises. As Bordeaux is the world’s single largest region of quality wine production, we expect to rebalance the Knight Frank Fine Wine Icons Index back towards top Bordeaux, principally from great, older vintages .

With this in mind, it’s not surprising that of the 25 top-performing First Growths in 2015, only two were from 2009 or 2010. Those vintages that performed best were 1989, 1990, 1996, 2000, and 2005.

We continue to see opportunities in Bordeaux in 2016 as the market continues its recovery.

2005 Classed Growth Medocs were up 9% in 2015, yet we are likely to see further upward momentum during 2016. It is a great vintage currently going through a backward, tannic phase, yet when it emerges from this part of its cycle it is likely to be seen as being on par with the great 2010 vintage.

Italy, Burgundy, California

Looking more widely, Overall, the Wine Owners Northern Italian Index is up 7.5% over the last 12 months, and will surely gather further momentum in 2016 with the continued interest in Barolo and Barbaresco.

Burgundy remains hot, with the Wine Owners Blue Chip Burgundy index up 15% in the last 12 months, and 26% over the last 3 years. California fine wine performance has been similarly strong.

Buying strategy

More than ever, ‘wine picks’ within a framework of quality, wine style, and relative value, is key.

Quality

For primary market releases the old saying ‘follow the producer, not the vintage’ still holds true, but these days that loyalty must be subject to the sense check of the ‘relative value’ analysis explained below.

The risk involved in buying within the secondary market is significantly mitigated by the body of tasting notes that accumulates as wine ages, allowing a proper evaluation through consensus, and a better sense of style.

Wine Style

The fashion for big, extracted wines is on the wane. The trend is firmly back towards wines of balance and finesse, and this is especially true of the most expensive wines. Modern styled producers tend not to see value appreciation to the same extent as their more timeless counterparts.

Relative value

High value wines bought to be kept for a number of years are commonly selected on relative value. Selecting specific critic scores and generating a price per point allows the collector to see which wines have, on balance, an upside.

Typically, price per points analysis is conducted on a vertical of a single wine’s vintages or comparatively between other producers’ wines from the same vintage within the same category or group of wines.

This week, Knight Frank launched the 10th Edition of the Knight Frank Wealth Report, which offers a unique glimpse into the attitudes, investments and choices of ultra-high-net-worth individuals (UHNWIs) from around the world. You can download the report here.