• Gold grabbed the headlines this week with a dramatic burst above US$2,000/oz.

• Inflation is out of control across much of the world, and investors are hunting for good longterm wealth-preserving assets – hence Gold’s rally.

• Fine Wine has closely tracked Gold for almost 20 years, but with slightly better returns.

• Fine Wine also has a number of advantages over Gold: It is 1) less volatile, 2) has much lower maximum drawdowns (less downside risk) and is less expensive to store.

• The bottom line is this: if you like Gold, you should love Fine Wine!

Inflation is out of control across much of the world. Investors are scrambling to protect their wealth in the new ‘cash is trash’ environment. Gold is finally starting to perform, but there is an asset which tracks Gold closely with even better returns (plus some other important advantages):

Cental Banks Lose Control of Inflation

Central banks are losing the fight against inflation (if they are even having one) in many large economies. Across the world CPI inflation is spiralling upwards:

Many economists believe that events in Eastern Europe - which have sent commodity prices sharply higher - will fuel even more inflation through the rest of 2022. Respected commentators are suggesting US CPI could breach 10% in the coming months. In this scenario, investors holding cash would see 10% of their savings wiped out (in real terms) this year alone. Not surprisingly, high net worth individuals everywhere are looking for places to put their capital where ii will rise at least in line with inflation. 

Fine Wine is an Effective Inflation Hedge

Fine Wine has done much better than merely protect against inflation. Since 2004, CPI inflation in the developed world has averaged around 2% per year. It very clear that Fine Wine has been more than an effective inflation hedge: 

Fine Wine is extremely ‘sticky’ on the downside. If Fine Wine prices ever come under pressure, holders tend to switch to ‘consumption’ mode – refusing to sell and electing to consume instead. Most holders of gold bars to do not melt their bars down and turn them into jewellery when the price of Gold falls!

Cost of Storage

Clients are always surprised to learn that Fine Wine is often cheaper to store than Gold. A US$100,000 investment in either physical Gold or the Cru Recommended Investment Portfolio has the following costs of carry: 

Conclusion:

The bottom line is that if you like Gold as a long-term inflation hedge, you should consider switching a part of that investment into Fine Wine. This is because:

• Fine Wine tracks the price of Gold closely and has actually outperformed it since 2004.
• Fine Wine has significantly lower volatility.
• Fine Wine has a much higher Sharpe Ratio.
• Fine Wine tends to experience much lower drawdowns.
• Fine Wine has a lower cost of carry (lower cost to store).

IMPORTANT NOTICE 

This report has been issued or approved for issue by an entity forming part of Cru (as defined below) and has been forwarded to you solely for your information and should not be considered as an offer or solicitation of an offer to sell, buy, or subscribe to any securities or any derivative instrument or any other rights pertaining thereto (“financial instruments"). This report is intended for use by professional or business investors only. This report may not be reproduced without the consent of Cru. 

The information and opinions expressed in this report have been compiled from sources believed to be reliable, but, neither Cru, nor any of its directors, officers, or employees accepts liability from any loss arising from the use hereof or makes any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this report. There can be no assurance that future results or events will be consistent with any such opinions, forecasts, or estimates. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. This information is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the product or products mentioned. Cru is not agreeing to, nor is it required to update the opinions, forecasts or estimates contained herein. 

The value of any products mentioned in this report can fall as well as rise. Foreign currency denominated products are subject to fluctuations in exchange rates that may have a positive or adverse effect on the value, price or income of such products. 

This report does not have regard to the specific instrument objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any products or investment strategies discussed in this report. 

Cru (or its directors, officers or employees) may, to the extent permitted by law, own or have a position in the products of any company or related company or products referred to herein and may add to or dispose of any such position or may make a market or act as a principal in any transaction in such products. Directors of Cru may also be directors of any of the companies mentioned in this report. Cru (or its directors, officers or employees) may, to the extent permitted by law, act upon or use the information or opinions presented herein, or research or analysis on which they are based prior to the material being published. Cru may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. 

For the purposes of this disclaimer, “Cru” shall mean: (i) Cru London Limited; (ii) Cru Asia Limited and (iii) from time to time, in relation to Cru London Limited and/or Cru Asia Limited, the ultimate holding company of that entity, a subsidiary (or a subsidiary of a subsidiary) of that entity, a holding company of that entity or any other subsidiary of that holding company, and any affiliated entity of any such entities. 

This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of an entity within Cru. Products referred to in this research report may not be eligible for sale in those jurisdictions where an entity within Cru is not authorised or permitted by local law to do so. In particular, Cru does not allow the redistribution of this report to non-professional investors or persons outside the jurisdictions referred to above and Cru cannot be held responsible in any way for third parties who effect such redistribution or recipients thereof. © 2022.