Luxe investor introduction
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Champagne can be a good investment due to increasing scarcity and demand driving up prices. Factors like vintage quality, producer reputation, and critic reviews affect Champagne values. Investing through a fund like LUXE provides advantages over individual investing including expertise in selection, lower costs, and handling logistics. LUXE focuses on top domains, outstanding vintages, and pristine bottles to create a diversified portfolio for long-term growth.
Luxe investor introduction
- 1. 1 Why Invest in Champagne? A Champagne vintage or cuvee can become highly scarce and sought after within a couple of years of being released by the producer. As well as an ever so slight surge in demand, can dramatically push up the price on what little cases remain after the initial release. As the overall supply of the highest-quality Champagnes declines, the price jumps to a quick rise resulting in a great investment. Driven by this wide variety in demand, the price of Champagnes such as Krug, Dom Perignon and Louis Roederer Cristal have skyrocketed over the past year, overtaking the big names of Bordeaux as an investment. Not only are the prices of Champagne driven up by consumption but also the uncertainty and over production of wines. While Bordeaux prices skyrocketed from the strong vintage in 2005 and then held steady on the 2006 wines, the 2007 vintage is considered a weak one, so serious wine investors interest has been diluted and turned to Champagne instead. LUXE FUNDFine Champagne Investments Investor Package LUXE Fund carefully researches, selects and manages our portfolios in order to reduce risk to our investors. 22.1% of consistent annual growth is unheard of in the midst of a global economic crisis, but not for investors of The LUXE Fund. 2
- 2. 2 What makes a good Champagne investment? There are a number of key factors to consider when creating a Champagne investment portfolio. The selection of Champagnes is fundamental in achieving potential investment returns. This is where the LUXE Fund can achieve your investment goals- using our expert experience the LUXE Fund obtains the best investment Champagnes to create a portfolio to financially benefit our investors. What to consider when investing in Champagne? • Champagne is not usually an asset in which returns a quick profit, we would normally advise a minimum investment period of between 3 to 5 years and preferably 10+. • Over the longer term, large format bottles can often outperform standard cases of 750ml bottles. This is an area where The LUXE Fund specializes. • Most Champagnes which are of investment grade are reviewed by independent critics The reviews and scores (out of 100 points), which these critics give can have a profound effect on the value of a champagne and should be taken into consideration. • Past performance of a particular Champagne in previous similarly rated vintages can be a guide, to some extent, as to how a current vintage might appreciate. • Certain Champagnes have strong followings in particular markets around the world and can be subject to fashion and brand status. This can have an important effect on supply and demand, as recently evidenced by the Chinese demand for “Fashionable Brand Names”. • Provenance is important and stock sourced directly from the Chateaux carries a premium. Physical condition is very important, especially for older vintages.
- 3. 3 1 Champagne as an investment is not subject to capital gains tax as it is classes as a wasting asset. Classed as an alternative investment, Champagne should be considered as an important percentage of any well-diversified portfolio. As an asset class, Champagne is unique. It is a tangible and consumable investment that benefits from a unique supply and demand environment. The figures on Champagne production are harder to come by because the houses are less forthcoming with information thus causing more mystery and often more consumption by the wine & Champagne drinking circles feeling there is more supply than demand. The result is more often not the case, thus leaving a very small amount of fine champagnes remaining. Champagne in not subject to Capitol Gains Tax. 1.Champagnes from the most reputable and highly sought after domains withproven value increases. 2. Champagnes from outstanding to exceptional vintages. 3. Champagnes that have received high ratings from renowned Champagne critics. 4. Champagnes that are in pristine condition and that have been stored in professional storage facilities under temperature control since bottling. Champagnes will be purchased within The LUXE Fund strict quality guidelines and will be stored in temperature and humidity controlled conditions in professionally managed warehouses with fully bonded insurance coverage. Who Can Invest? All investors whether an institutional investor, professional investor or experienced investor must qualify as a Well-Informed Investor. The LUXE Fund feels there is only one-way Champagne prices are headed, and that is up in a great way, and a great performing investment for any well- informed investor. Which Champagnes are bought for the Fund? www.TheLuxeFund.com Continued…
- 4. 4 2 Champagne Performance Fine Wine including Champagne Performance. The longest reliable data, going back to January 1988, shows cumulative annualized returns of Fine Wine including Champagne is 11.3%: the equivalent figure for the Dow Jones is 8.5%. Moreover wine/champagne is a lot less volatile. Since 1988, taking every possible 5 year time period (i.e. January 1988-January 1993, February 1988-February 1993 etc, a total of 254 periods), Wine/Champagne has shown a negative return in just one period, and that of only -1.1%; the Dow has seen 57 negative periods with the worst being -33%. Champagne vs Wine Performance. As explained above, Fine Wine including Champagne, has outperformed the Dow. Surprising for investors, Champagne, when separated, out-performs Fine Wine. Champagne follows a less volatile performance and remains steady through difficult markets. Following tried and tested Champagne earners, an investor would see a 300% increase. Continued… www.TheLuxeFund.com
- 5. 5 Champagne as an Asset: Private Collection vs Luxe Fund Interest in Champagne as an asset has largely been under the radar for investors. That is perhaps surprising as investors become more aware Champagne’s track record of strong returns, low volatility and low correlation with other assets such as gold, oil and traditional stocks. As with a tangible asset or equity, an investor has the option to buy and manage a private portfolio or collection himself or herself, or should they enter the investment market via a collective investment scheme – also known as a ‘fund’. Here are the four most important areas of Champagne investment to consider: • Champagne selection (risk reduction via diversification) • Costs and fees • Logistics and ‘back office’ functions • Expertise, experience and industry connections Champagne selection A Carefully selected Champagne portfolio provides risk reduction via diversification. Carefully selecting Champagnes with proven track records and excellent vintages create the best prospects of increasing in value and showing excellent returns when sold at the appropriate time. This simple method is the key to maximizing returns on Champagne investments. Returns If investing directly, an investor can either choose the Champagnes themselves or allow a merchant to make the selection. If choosing himself or herself, the individual is unlikely to use a sophisticated model – more likely, perhaps, to go on critical reviews. These are available to every participant in the market, and therefore – unlike the Fund’s model – confer no advantage on any single user. If the merchant is allowed to make the selection, there is every possibility that the champagnes chosen will be ones in which the merchant is otherwise struggling to sell – or perhaps they are being marketed on behalf of a favored client. In any case it is unlikely to be pure investment potential and risk management, which dictate the portfolio. Investors are becoming more aware of fine Champagne’s track record of strong returns, low volatility and low correlation with other assets such as gold, oil and traditional stocks.
- 6. Costs and Fees Is it more expensive for an investor to invest through a fund rather than building a personal collection? Costs of investing through a fund are clear and explicit. However there are also costs to investing directly – i.e. buying and selling through a merchant – it is just that these are better hidden. When buying and selling through a merchant, one must accept the margins which are inherent in a merchant’s business. A merchant’s business model is to buy Champagne, add on a margin and sell it again: the greater the margin (i.e. the lower the price at which he buys, and the higher the price at which he sells), the more profit he makes. In short, the merchant does better when the customer does worse. In contrast, a fund’s interests are typically aligned with the investor. Fees consist of an annual management fee, which is a percentage of either the current value of the holding or a percentage (2% for an institutional investor) of the initial investment. But the largest remuneration tends to come from the performance fee, which is calculated as a percentage of the profit, which the investor actually makes at the end of the holding period. Clearly, the greater the fee, the greater the profit the investor will have made. Logistics and Operations Finally, it is important to understand that we are dealing with Champagne, which is a physical asset, and moreover one which does not come in homogenous units (as does, for example, gold). When we buy a case of Champagne from auction, private collector, or negociants, it must first be transferred into our account for storage. When the Champagne arrives in our storage facility, the shipment is opened and inspected as well as undergoing a lengthy provenance confirmation. If there are any imperfections in the shipment (for example poor levels, soiled labels or damage, it would be sent back for full refund. All this takes time and effort (which would have a cost to a direct investor), but is worth the trouble because it means that we start the investment period with a case in perfect condition. Moreover buyers are aware of this, and as the appearance of the champagne is now crucial to its value, these procedures allow us to obtain the best prices when subsequently selling. It is, of course, possible for direct investors to follow the same procedures, but it is likely to be time consuming and more expensive. The LUXE Fund www.TheLuxeFund.com