Dinghong or the 1st Chinese Wine Investment Fund

I just came back from Bordeaux where I have been working on some issues  related to the market of La Place de Bordeaux.

Bordeaux has something very special about it. It is a mix of strong tradition and very modern and accurate economic vision. I would like to give you a glimpse of Bordeaux’ brasseries where a lot of things are being discussed… And rest assured that China is one of the most popular topics there.

However, there is one particular subject that we reluctantly talk about in Bordeaux, although it has been discussed a lot in the Press since August: it is the creation of the first Chinese Fund specialized in wine investments: Dinghong.

Dinghong is a Fund dedicated to wine investment. Mrs Ling, one of the founder, will invest in Bordeaux Crus Classés (not only in the most expensive ones) and in Burgundy’s wines, which are not as famous as Bordeaux’s in China. The Fund will invest in both Primeur and back vintages.

To be part of  Dinghong, the minimum required investment is 1 million RMB, locked for a minimum of five years. According to the Financial Time, the Fund is expected to deliver an annual return of about 15%.

According to the French local newspaper Sud Ouest, Ling Zhijuin expects to collect 200 million RMB each year for the five next years, in order to reach a total value of 1 billion RMB.

Mrs Ling said that her Fund will be focused not only on good investments, but also on deepening Chinese appreciation for fine wines . But, it doesn’t say if the investors will have the ability to taste and drink the wines they buy through Dinghong…

Undoubtedly, China already has a huge impact on La place de Bordeaux, increasing somehow the prices which had never reached such high levels. Moreover, Dinghong is not the only Fund interested in wine investment in China. Some private Funds already offer wine investment among others products. This new phenomenon raises the question: might those Funds induce a Bordeaux financial bubble?

If you take a step back, you realize that this is not the first time that wine, especially Bordeaux wine, has been used as a secure investment. For instance, talking with some brokers of Bordeaux, I discovered that some English Funds had also been created for tax advantages back in 2005.

So the question narrows down to this : do Chinese Funds represent a real trend that will deeply transform some aspects of La Place de Bordeaux, the distribution for instance, or, is it simply the everlasting repetition of economic cycles which will not significantly affect the rules of the game ?