How We Model Estimated Returns

An Insight into our Historic Return Analysis

We have established ourselves at WineFi as a market-leader in data-driven quantitative analysis within the wine markets. The Investment Overviews for each of our syndicates feature an average historic return. This article outlines the process by which we calculate this historic return:

1. Analytics: The data team run analysis for each portfolio focusing on:
   
   
   • Trend identification: Defining which wines or groups of wines are most likely to appreciate over the coming 5-7 years;
     
     
   • Price analysis: Identifying producers, labels and vintages that have appreciated most historically, under/overvalued wines and scoring wines with our unique relative value age-adjusted price-per-point metric;
     
     
   • Liquidity analysis: Using trade and listing data to understand which wines have the strongest secondary market demand and how this changes over time.
     
     
     
2. Modelling: Through the analysis we define a set of rules and criteria that have proven to be predictive of returns, these rules and inputs are used to build algorithms which predict wines to invest in.
   
   
3. Backtesting: The algorithms are tested in each investment period from 2002 to 2024. For each year 1000s of portfolio simulations are run with the algorithm selecting purchases.
   
   
4. Qualitative review: The average CAGR and variance across all simulations are used to define a starting point for anticipated CAGR. We then consider current market conditions and outlook, aligning CAGR expectations of our our veteran investment committee with model simulations.
   
   
   

Variability in year-on-year wine returns:

Fine wine returns exhibit significant year-over-year variability, typically characterised by periods of substantial price growth followed by years of minimal to low single-digit increases. This can be attributed to several key factors:

• Supply levels: Wine supply is heavily influenced by weather conditions, which affect annual yields and overall availability in the market.
  
  
• Global trends and economic conditions: Shifts in global consumer preferences and varying economic environments play a crucial role in determining market performance.
  
  
• Merchant stock levels: When merchants are overstocked, or face reduced demand, they often implement price reductions to manage inventory levels. This was particularly evident in the wake of covid, retailers and merchants anticipated that post-pandemic demand would continue at pandemic levels.
  
  

For further information, please contact support@winefi.co.