More Investors Pour Into Wine Funds

Robert Lench, manager of the Vinum Fine Wine Fund in Guernsey off the coast of Normandy, says his business is doing very well, thank you very much.

The 58-year-old, who buys bottles of Petrus, Chateau Cheval Blanc and Chateau Margaux wines for the fund, is benefiting from the turmoil in the financial markets, which is driving investors out of stock markets. Vinum's collections climbed 12 percent in September, another 15 percent in October and 2 percent in November.

"We've seen an increase in interest," Lench said. "Markets have frightened people."

Vinum, Elite Advisers' Nobles Crus in Luxembourg and Arch Financial Products's Arch Fine Wine IC fund in London are among wine funds created in the past 18 months that are luring investors as the Morgan Stanley World Index sank 40 percent this year. Investors buy shares backed by actual bottles, getting an asset group whose fortunes are not closely tied to credit markets. Vinum slipped only 3.1 percent this year, Elite climbed 20 percent, while Arch advanced 0.5 percent.

Investments in such alternative funds may continue to rise next year, said John Godden, chief executive officer of IGS Group in London, which advises hedge funds.

During crises, investors prefer "things they can touch," like wine, art or antiques, he said.

"We expect to see alternatives rise into next year," Godden said. "Everyone is knocked off balance by the performance of equities and bonds. If the value of wine goes down you can drink it."

Art investments also have beat stocks, with the Art Market Research Art 100 Top 25 Percent Index up 41 percent this year.

Vinum requires a minimum $15,060 investment. Started with 2 million pounds, it now has 5 million pounds. Lench buys wines from France's Bordeaux region because of the "structured" market, where bottles pass from the chateau to brokers and negotiators and have a system to help set prices.