01 March 2018
High-net-worth-individuals (HNWI) across the globe are showing an increasing interest in acquiring fine wine, and the thirst of the Chinese is proving particularly unquenchable. According to the International Wine & Spirit Research (IWSR) organisation, China is set to become the second-biggest wine consumer in terms of value by 2020, second only to the US and overtaking both Britain and France. Moreover, John Kapon, chairman of American wine auction house Acker Merrall & Condit, said in December that “Chinese buyers are now the most important segment of clients for us”, adding that they are “collecting and buying the best wines like never before.”
Indeed, eager Chinese HNWIs are swapping fine tea for fine wine and flocking to Hong Kong to grab some of the best and most expensive wine collections on offer. So much so that Hong Kong has become an important sourcing hub for mainland consumers and is now ranked as one of the two most important wine auction markets in the world, alongside New York.
In the 2017 Christie’s and Sotheby’s auctions, Hong Kong stood tall alongside the more established UK and US markets. The highest selling wine lot among Christie’s Hong Kong auctions was a dozen bottles of 1947 Château Cheval-Blanc, acquired for slightly above HKD $1.5 million (US $203,740), not too far behind the top bid for the same wine in London. For Christie’s in New York, the top bid placed throughout 2017 (for 12 bottles of DRC’s Montrachet 1990) was US $104,125. Meanwhile, the highest bidders at Sotheby’s 2017 Hong Kong auctions acquired lots for HKD $1.2 million (US $154,200) and it was noted that all of the specialist highlights were purchased by private buyers from Asia.
As their personal wealth increases, HNWIs centre their vision on steady long-term investments, ideally including a ‘passion investment’ such as wine. Last year, fine wine notably surpassed its luxury peers as the wealthy’s most desirable collectible. According to the Knight Frank Luxury Investment Index, by the end of Q2 2017 wine had achieved an impressive 25% increase in asset performance over the previous 12 months, replacing classic cars in the top spot and steaming ahead of fine art, which secured second place having demonstrated a 7% increase over the same period.
And as the Chinese connoisseur’s appetite for fine wine rises, so does their interest in protecting their newly acquired assets. In line with the upsurge in high-value wine purchases, the fiduciary industry is witnessing an increase in Chinese HNWIs actively seeking long-term asset protection. More specifically, protection that offers sufficient flexibility to allow the collection to be enjoyed as and when required. Holding fine wine in a trust fulfils this desire for protection and access, as it offers robust protection and helps facilitate effective estate planning, while still allowing beneficiaries to enjoy a special drop of vintage wine over that all-important business event.
With demand for fine wine promising to hold strong, we expect the increased emphasis on luxury asset protection and administration among our clients to continue. And to that we say, Gānbēi!
Stuart Dowding is Managing Director of First Names Group in Hong Kong. An experienced private client practitioner, Stuart has exceptional working knowledge of both corporate and trust structures and has worked with numerous high-net-worth individuals and families to deliver bespoke asset protection solutions.
This article has been issued by First Names Management Limited on behalf of certain companies that form part of the First Names Group. The article has been prepared for general circulation to clients and intermediaries, and does not have regard to the particular circumstances or needs of any specific person who may read it. Nothing in this article constitutes legal, accounting or tax advice or investment advice.
The information contained in this article has been compiled by First Names Management Limited and/or its affiliates from sources believed to be reliable, but no representation or warranty, express or implied is made to its accuracy, completeness or correctness. All opinions and estimates contained in this report are judgements as of the date of publication, and are provided in good faith but without legal responsibility.
