DIGITAL securities exchange ADDX has added a tokenised wine portfolio to the diverse mix of alternative investments on its platform.
The portfolio, managed by Provenance Treasures, comprises curated French wines from the Burgundy region in France. About half of the bottles carry the "Grand Cru'' appellation, the highest tier of wine classification in Burgundy.
It is the first investible wine portfolio by Provenance Treasures, a licensed wholesale wine and alcohol trading company and subsidiary of SGX-listed Intraco.
The primary subscription for the wine tokens was completed in September at S$0.83 per token. The minimum subscription size was set at 1,000 tokens or S$830, giving investors fractional access to the deal. Secondary trading of tokens is currently live on the ADDX exchange.
The indicative value of each bottle ranges from hundreds to thousands of dollars. The vintage years of the wines are between 2006 and 2020.
Interest in alternative assets, including fine wine and collectibles, has been on the rise, as investors seek investments with low or negative correlations with traditional markets. More recently, concern over inflation has also spurred interest, as real assets are regarded as inflation hedges.
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So far this year, wine has significantly outperformed equities and bonds. Based on indices by Liv-Ex (London International Vintners Exchange), the broad Liv-Ex Fine Wine 1000, which tracks 1,000 wines from across the world, has generated year-to-date return of 14.1 per cent. The Liv-Ex Fine Wine 100 index returned 8.1 per cent in the year to date.
As portfolio manager, Provenance Treasures has the discretion to make wine trading decisions in consultation with Domaine Wines, a shareholder of Provenance Treasures. Domaine Wines is a Singapore wine distributor focusing on French Burgundy wine.
To date, Provenance Treasures has purchased and taken delivery of 234 bottles with an indicative value of S$696,000. It expects another 125 bottles with an indicative worth of S$386,000 to arrive in Singapore by mid-November.
The fund will begin to charge a performance fee of 20 per cent once returns hit a hurdle rate of 8 per cent per annum. Profits are calculated by taking the realised sales proceeds of the wine or any insurance proceeds, minus the actual cost of selling the bottles and any administrative expenses. There is no annual management fee. But investors will bear the cost of storage and insurance, operating and administrative expenses and any other ancillary cost and expenses. For these, they are charged an annual amount capped at 2.5 per cent per annum of the initial reference value of each bottle.
Provenance seeks to optimise investment returns by taking into account a number of factors, such as the prevailing general economic environment, consumer demand and wineries' supply, trends in prices, and global wine consumption. The manager may sell bottles to wine merchants, collectors or hospitality and F&B operators. Investors will be given the first right-of-refusal before any sale.
The firm may return the proceeds of wine sales to investors as capital and redeem a corresponding number of tokens from investors. It may also decide not to return the capital, and instead reinvest the sale proceeds by importing new bottles of wine.
Intraco executive chairman and director Mak Lye Mun said: "We have seen an acceleration of demand for digital assets… The tokenisation of wine is another step towards Intraco Group's strategy to expand into the digital assets business. We're very encouraged by the interest investors have shown towards the wine tokens, and will seek to identify more suitable asset classes in Singapore and the region for tokenisation.''
ADDX chief executive Oi-Yee Choo said the Burgundy wine portfolio is the first luxury asset to list on ADDX. The value of fine wine as an investment class has appreciated 137 per cent over the past decade, she said.
"Wine investments can play a unique role in a portfolio because investment performance tends to be based on factors unrelated to the stock markets. These include weather and climate patterns, harvest yields, vineyard reputation and consumer trends.''
She added that the tokens were fully subscribed by investors, many of whom are wine connoisseurs, "which demonstrates that when investors have the passion, interest and knowledge relevant to an investment asset, they act as a natural capital 'home' for that asset''.
A paper on the fine wine market in Asia-Pacific by Liv-Ex noted that China has traditionally driven demand for wine, particularly those from Bordeaux. But the Covid-enforced closure of the border between Hong Kong and China has hit wines traded in the secondary market. It has, however, led to expectations that Singapore could emerge as a wine collector's hub.
Liv-Ex said that Bordeaux traditionally took the lion's share or 95 per cent of the secondary market trade in Asia at its peak in 2011. But this share has declined to around 36 per cent of Asian demand. Burgundy's share has risen from less than 5 per cent of purchases a decade ago to 37.3 per cent this year.
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