After a two-year hiatus from Bay Street, former Vanguard Canada chief executive Atul Tiwari is raising a glass to a new joint venture with British-based Cult Wine Ltd. that will allow retail investors to access fine-wine investing.
Mr. Tiwari, along with former Vanguard executive Carrie Tuck, will announce on Tuesday the launch of Cult Wines Canada, a joint venture that will offer retail investors direct access to an alternative investment class that has typically catered to high-net-worth investors.
“A lot has changed over the past two years in the markets,” said Mr. Tiwari, chief executive officer of Cult Wines Canada. “It has not been a broad market rally and we are concerned about the concentration seen in a few stocks. We believe it is the right time for investors, active and passive, to diversify out of broad indexes that are not providing sector diversification.”
Mr. Tiwari believes that diversification can be found in bottles of wine.
“Fine wine has historically had low correlations to equities and therefore provides diversification within traditional portfolios,” said Mr. Tiwari, who has been a collector of fine wine for over 20 years.
Fine-wine investing is often referred to as real assets or “passion assets,” bucketed in with vintage-car enthusiasts and art collectors. For many, it consists of purchasing cases of wine to store in personal cellars, or consume with family and friends. For those who look to resell their collection, access to private auction houses can come with hefty fees – sometimes as much as 40 per cent of the sale.
Cult Wines is breaking down that barrier.
“We want to make investing in fine wine as easy as drinking it,” said Ms. Tuck, chief marketing officer of Cult Wines Canada. “We’ve been trying to find an alternative asset class to provide all the benefits of alternatives to more people.”
Cult Wines’s launch into the Canadian market this month coincides with the Bordeaux 2020 En Primeur – an exclusive event that allows investors access to purchase new vintages before they are bottled.
With more than $270-million in assets, Cult Wines already operates in London, Hong Kong, Singapore and Shanghai in addition to its North American debut last year in New York.
“We believe there is a huge appetite for fine wine investment in Canada,” Tom Gearing, CEO and co-founder of Cult Wines, said in a statement. “The Bordeaux 2020 En Primeur has traditionally been more of a focus for European investors, but as we establish our Canadian presence, we expect to gain new investors and provide them with this unique opportunity to enter the fine wine investment market.”
Canadians with as little as $15,000 will be able to invest in a global portfolio of fine wines from regions that typically include Bordeaux, Burgundy, Rhone and Champagne in France; Tuscany and Piedmont in Italy and the New World such as Napa Valley in the United States. The company will first introduce a portfolio for investors with $45,000 this month, and open the $15,000 portfolios in early July. Each portfolio includes a variety of cases from different regions to diversify the risk.
Since 2009, the company has seen average annualized returns of 12 per cent, compared with the TSX Composite’s return of 5.32 per cent.
For a management fee of 2 per cent, investors are provided a dedicated portfolio manager who – similar to investing in equities – will assess a client’s investment objectives, time horizon and risk level before customizing a wine portfolio. Clients purchase physical cases of wine, which are stored in a secure warehouse in Wiltshire, Britain. Their accounts are actively managed and clients can see daily price updates and portfolio valuations online.
There are no trading fees but investors do need to pay a one-time operations fee between 2.5 and 5 per cent that covers shipping, insurance, purchasing the wine and administration costs. (For accounts over $1.5-million, the fees drop to zero.)
Mr. Tiwari says the fundamentals of fine-wine investing come down to two factors: supply and demand.
As wine matures and improves over time, so does its value. The top wine producers produce a finite quantity in each vintage and increasing consumption, especially from countries like China, creates long-term growth in value, he adds.
Portfolio managers are able to select each investment of the portfolio from wines already pre-selected from a global investment committee, which Mr. Tiwari has joined.
The committee rates wines on specific characteristics – similar to the way managers rate equities, Mr. Tiwari says. The committee looks at factors such as brand, producer history, vintage quality and production, supply and historical price performance.
Building a Canadian subsidiary from the ground up is a challenge Mr. Tiwari knows well.
In 2011, he was a one-man band launching the Canadian division of U.S. investment giant Vanguard Group. Mr. Tiwari quickly built the asset manager into Canada’s third-largest exchange-traded funds provider with more than $30-billion in assets under management by the time of his departure in 2018.
“After Vanguard, I was really interested in where ETFs were going to go and I have always been interested in providing investors access to different asset classes that they can’t typically get on their own,” he said.
“I wanted my next move to involve something I thoroughly enjoyed and was passionate about. And for me, that was marrying my passion for wine and my passion for investing and building businesses together.”
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