Singapore-based private market exchange ADDX has tokenized a portfolio of vintage French wines to enable investors to gain access to the alternative asset class.
The wines are sourced from top wineries in the famed Burgundy region of France, including Domaine Coche-Dury and Domaine Leroy. About half of the bottles carry “Grand Cru” appellations, the highest tier of wine classification in Burgundy.
The indicative worth of each bottle ranges from hundreds to thousands of dollars. The vintage years of the wines fall between 2006 and 2020.
In September, the primary subscription for these wine tokens was completed at S$0.83 (58 US cents) per token. The minimum subscription size was set at 1,000 tokens or S$830, to give investors fractional access to the investment deal. The secondary trading of tokens is now live on the ADDX exchange.
The portfolio is managed by Provenance Treasures, a licensed wholesale wine and alcohol trading company that is a subsidiary of Singapore Exchange mainboard-listed company Intraco Limited.
The investment hurdle return rate is 8% per annum; the portfolio manager will only receive management or performance fees when returns are above the hurdle rate.
To date, Provenance Treasures has purchased and taken delivery of 234 bottles of wines with an indicative worth of S$696,000. It is expecting another 125 bottles with an indicative worth of S$386,000 to arrive in Singapore by November 2022.
The bottles are stored in a professional, secured wine storage facility in Singapore and insured at cost.
As portfolio manager, Provenance Treasures has the discretion to make wine-trading decisions in consultation with Domaine Wines, a shareholder of Provenance Treasures. Founded in 2014, Domaine Wines is a Singapore wine distributor that focuses on French Burgundy wine.
Provenance Treasures will take into consideration factors such as the prevailing general economic environment, consumers’ demand and wineries’ supply situation of selected wines, expected price trends and global wine consumption trends, with the goal of optimising investment returns. The portfolio manager may, from time to time, sell bottles of wine to wine merchants, wine collectors or hospitality and food and beverage operators. Before the sale of any bottle of wine is executed, investors will be given the first right of refusal to purchase that bottle at the prospective sale price.
Provenance Treasures may then return the proceeds of wine sales to investors as capital and redeem a corresponding number of tokens from investors. The portfolio manager may also decide not to return the capital, and instead reinvest the sale proceeds by importing new bottles of wine.
Choo Oi-Yee, chief executive officer of ADDX, says: “The value of fine wine as an investment class has appreciated 137% over the past decade. Wine investments can play a unique role in portfolio diversification 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.
“The Burgundy wine portfolio by Provenance Treasures is the first luxury asset ADDX has listed. The deal allows investors to own and trade coveted, top-quality wines, while earning a return through an appreciation in the value of the portfolio. 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.”
Amid heightened concern over rising inflation and market volatility, investors are increasingly re-allocating capital toward private markets as they seek resilience and diversification, Choo notes. “This is a space in which ADDX has established itself as the market leader in Asia, offering private equity, venture capital, hedge funds, commercial papers and bonds, and now luxury investment assets,” she adds.