The Managed Bordeaux Wine Investment Plan is offered by Drummond & Co, the investment advisers best-known for their unusual tax-beating schemes based on metals, diamonds and even racehorses. Drummond’ chief. one-time
wine merchant Michael Davey, says: ‘‘People think fine wine prices are very volatile. In fact, they have consistently outperformed the FT All-Share Index. ‘‘Since August 1978, the Decanter magazine index has gone from 100 to 640.’’ 
The wines will be stored, managed and traded by Alan Rayne’s company Magnum Wine, advised by Master of Wine David Peppercorn. For a minimum £2,500, investors get a portfolio of top clarets. ‘‘Investors actually own the wine, not shares or units,’’ says Rayne. Drummonds claims that
£10,000 invested in claret in 1975 would have grown to £112,240 by last year. That beats the FT Index by £17,000, stamps by £81,000, and gold by £88,000. And if investment goes wrong, you can always treat yourself and drink it.

By Nigel Cope
Let's face it, Cedric Brown is facing a whole new set of problems. For starters, think of all that extra tax he's going to pay. Perhaps he should have a word with Michael Davey, an old pro in minimising tax and National Insurance contributions.
Mr. Davey, who runs the Drummond & Co  consultancy, organises schemes where bonuses and dividend payments are paid in racehorses and Persian carpets to avoid National Insurance. yesterday he launched his Bordeaux plan.
 A kind of Chateau PEP, it takes a minimum investment of £2,500 and invests it in a portfolio of posh wines, which the group then trades.
The scheme avoids income tax and capital gains. 
" With the stock market so dead at the moment, people are looking for alternative investments," Mr. Davey says, " And with Christmas coming up it would make a nice gift." One for Mrs. Brown, perhaps?

Drummond & C0., the wine seller, has moved into a managed Bordeaux wine investment plan. It aims to provide a return of between 15 and 20 per cent a year. Each portfolio will be invested in wine from the top 25 Bordeaux
chateaux. Drummonds’ fund managers will travel to Bordeaux to pick wines which. in their opinion, will mature better than others.
The board includes Mr. Alan Rayne, managing director of Magnum Fine Wines, Mr. David Peppercorn, a master of wines and Mr. Michael Davey, chair-man of Drummonds. According to Mr. Davey, the return on claret has not dropped below the FT-SE 100 for over 20 years.

He said: ‘‘The volatility of prices of these wines makes them far safer than equities. All table wines are depreciating assets in the eyes of the Inland Revenue, so no income or capital gains tax is payable on profits.
The charges are 1.5 to 2 per cent. These cover the cost of storage in a bonded Warehouse and insurance. But wine investment is not covered by the Financial Services Act, so there is no coverage under the Investors Compensation Scheme. 

Mr. Davey considers an Investment of three to
six years to be short term and 10 years plus long term. The minimum investment is £2500 and clients who invest at least £10,000 can Withdraw an annual income of up to 10 per cent. 

If your last investment venture left you clutching a mighty hangover then now may be the time to move into something more liquid and more tasty : wine. A Chateaux PEP could be far more fun than getting giddy over gilts and bonds.

Wine is negotiable currency world-wide and you don't need to be an oenologist to appreciate why splashing out some money for a case or two might not be such a bad thing. For the private wine buyer there is no income tax or capital gains tax to be paid on the profit and for inheritance tax the  liability is only on the purchase price, not the market value.

The weather is one of the main reasons why wine could be a wise money maker at the moment. During the 1980s the weather was kind to the vines and the decade produced four top vintages, pushing market values down. But since  the start of the 1990s the weather has been poor, forcing prices of the good vintages up again.

The market is bullish and prices are looking up.  To the end of March the wine market rose 11.4% and some French reds even doubled in price in 1994. According to Michael Davey, chairman of Drummond & Co, which runs
a managed Bordeaux wine investment plan, if you spent £10,000 on some good quality wine in 1975, that investment could have reaped around £150,000 by the end of 1994. In the last two years the company has sold £40 million worth of wine through its Bordeaux wine investment plan. 

 If this sounds too good to be true, there are rules to follow
and risks to note. Investing in wine is speculative, rather like property or fine art. But compare a £10,000 wine investment with the same investment in shares between 1975 - 1995.
 With the FT All Share Index  you would realise £102,630 : in Chinese Porcelain you would net £93,390. At the bottom of the market, diamonds, certainly not a girl's best friend at the moment, would only return you £18,500.
 

As an investor there are two things you need to decide : how much to invest and for how long. A wine portfolio should be a mature investment. 

  A good 1990 wine would not be drinkable until 2003. For the short term, such as five years, you need to balance your choice of wine according to how much you can make and what it is you might want to drink.  The minimum
worthwhile punt would be around £5,000, although you could go as low as £2,500. 

With Drummonds Managed Wine Investment Plan there is no annual management fee and once you have bought your wine, you will receive regular price updates on the wines you hold.

What you don't do is buy the wine and stick it in your cellar, occasionally lifting out a bottle or two to check if it's  OK
 Your investment will be shipped off to a bonded warehouse for which you will pay 1.5 - 2 % a year to cover insurance and housing.  The warehouse sends you a certificate of what is being held.

Any market which is prey to the vagaries of the weather needs to be approached with extreme caution, which is why wines from Bordeaux are the usual currency. Bordeaux is traditionally France's classiest wine-producing area.
You need to bear in mind there is no quality control for wine but a Bordeaux Index run by Decanter magazine will allow you to monitor your investment. This currently stands at 674.02 having opened at 100 in August 1978 and reflects a great cross - section of Bordeaux wines.
 

You also need to note that as you actually own the wine it is not covered by the Financial Services Act and there is no compensation fund. Neither is wine as easy to sell as it is to buy, but wise initial selection should reap dividends

MONEY GO ROUND OCTOBER 7th 1995
TIME IS NOW RIPE TO PICK LIQUID ASSETS

MONEY might not grow on trees but, if the marketing material is to be believed, it may grow on grape vines.
Investment in vintage wine - considered in City circles to be as wacky as investing in ostrich farming - is enjoying a resurgence as connoisseurs and investors decide they want some drinkable liquidity in their portfolio.

Paul Bowker, director of the wine department at Christie's said there was an " extremely strong demand worldwide and an extremely short supply of top wines".
" That is , of course, an economic recipe for high prices. Eighteen months ago Christie's sold a case of Chateau Mouton Rothschild for £1000, or about £21 a glass. Last week, a case sold for £2,200, or about £46 a glass.
Although this is an exceptional example, Bowker said he had seen vintage wine prices increase by 15pc to 20pc over the past year. " The market is booming ," he said.

But Bowker warned the movement was not always upwards. " I have slight reservations about buying as a pure investor. ObviousIy investors, he said should have an interest in wine before they put money in. " We'll do it all for you " schemes claim to fill this knowledge gap.   Drummond's offers a Bordeaux-managed wine investment plan, with literature that boasts " profits grow faster in the vineyards".
This is how it works: investors pay about 1.5pc of their investment, which is a minimum of £2500, into the plan. For that charge, the investor gets the company's wine selection expertise and the wine ,insured and stored in a temperature controlled warehouse. 

A sale fee of up to 2.5pc is levied when wines are sold if the funds do not stay under management and the company makes additional profits by charging the investor a price half-way between wholesale and retail wine prices. However the company literature warns: " If investors
need to sell their wines, only the very best have a ready market.
Other Analysts warn investment in fine wine is mostly for the wealthy, sophisticated investor who wants an interesting investment to add to an already diversified portfolio. Importantly, they warn it is only for investors who can afford to sit on an investment for at least five years. Of course, the investment can always be uncorked if the market plummets.
Michael Cartwright, marketing director at investment managers Carrington Pembroke and a wine buff, recently found rocketing prices too much for his palate. Mr Cartwright bought a case of Chateau Le Pin in 1986 for £300 and put it away for his silver wedding anniversary this summer.
A few days before the anniversary he checked the wine's going rate at recent auctions. Shocked, he quickly sold it for £2500.

Alison Uncles
Money-go-round. Saturday October 7 1995.
On the Mat is a sceptical analysis of the more bizarre " investment opportunities" promoted via mailshots. readers who have received such items can send suggestions to : On The Mat, City Office, Daily Telegraph,
Salter's Hall, 4 Fore Street, London, EC2Y 5DT

by Tony Levene and Dominic Rushe. 

Imagine yourself leading in a winner at Royal Ascot this week with the champagne corks and the flashbulbs popping. That would turn heads.

Or what about appearing at a first night of a new, hit film which you've backed with your own cash ?
And think of the kudos when you open a bottle of top class claret - especially when you reveal you've only paid a fraction of the wine merchant's price.

Turning your dreams into investments can be more than a dream. You could reap rich rewards. And you don't have to be a millionaire to afford it.
Horse fanciers and film fans can get an insider's view of their favourite pastimes for just a few hundred pounds. Would be wine buffs can start their cellar with a case costing less than £100.

Low budget films can turn into high return investments - and you pick up more every time they're repeated on late night television.
Buying into the best horses can bring huge rewards. A winner of a classic race can be worth millions at auction while moving in and out of top wines can bring far greater gains than the returns from stocks and shares - assuming you can resist the temptation to drink your investment.

But don't give up the day job as anyone who has been a screen or theatre angel, a wine investor or a horse race owner will tell you.

Backing your pastimes may not be the key to financial success. You will be up against the full time professional in businesses that are amongst the riskiest - so you should only put up money you can afford to lose.
 

Some schemes are sold with the lure of tax breaks. Check with the Enterprise Investment & Business Expansion Schemes Association on their legality. Tel., 0171 613 0032

* Ensure you know whether perks of ownership are guaranteed.

* Never expect to raise loans against "hobby" assets.
* Fortune & fashion are fickle. Today's hot number is tomorrow's leftover.

A s home consumption of wine grows, consider not just drinking it, but keeping it long enoughto make a profit. Buying your favourite Bordeaux and selling it a few years later might mean that you can drink for free on the profit, or how about layingdown some port for a 21st birthday present? It could be a serious investment. Paul Bowker, former head of wine at Christie's auctioneers and now on the wine advisory board atVinopolis, reckons if you buy  well, you can realistically see returns of 30% a year. Ofcourse, like stocks and shares, wines can fall in value too, but at least you can always drink the negative equity*. 

 Here London's top wine experts offer some tips on building up a lucrative cellar. 
 

 Since 1855, Bordeaux wines have been classified into five ranks.The crème de la crème are thefirst growths, closely followed by  the super seconds; further down
 come the third, fourth and fifth  growths. Fraser Jamieson , broker at Berry Bros & Rudd, says the better the wine, the longer it takes to mature: first growths will take 15 to 20 years.  If you can afford more than £1,000 per case, Bowker tips Château Lafite, Château Latour, ChâteauMouton-Rothschild and Château Margaux.

Although they have not yet been bottled, Jamieson says 1998 Pomerolsand St Emilions have been excellent. They can be bought en primeur (before being released on the open market) from £200 a case. The hot summer of 1996 produced good vintages which are now coming onto theopen market; the wines of 1995 are softer and for early drinking. 
 

To store in bond you need to set up an account with a
  broker and pay an annual storage charge of about £6 a case. Again, factor in this cost before buying. As the
Inland Revenue views wines as a 'wasting chattel', you
  will not have to pay capital gains tax* on the profits you make on your cellar. 
 

 At a Christie's auction in September 1997, cases valued at a total of £3.5 million sold for £7 million. However, when the Asian crisis bit the stock markets a month later, wine prices crashed. In 1998 many wines lost 20 to 40% of their value, but things are picking up again now. 

  Jamieson says: 'We are in a rising market, but don't
  expect the phenomenal returns of mid-decade.' 
Be canny with your timing  Wines are priced at three different stages: en primeur, on arrival into the country two years later, and on maturity. Wines from 1998 can now be bought en primeur. This is risky because the wine has not yet  matured, but by taking the gamble you will be able to reserve stock which may be scarce when comes onto the open market. You will also be able to secure it at a cheaper price. 
 

Personal Finance

TAKING RISKS FOR HIGH RETURNS

By JODY BRETTKELLY

SIP it sell it or save it - wine is becoming a popular buy for investors with a lot of bottle and some spare money. But investing in wine is not for the fainthearted or cash-strapped. One of the less obvious risks was highlighted by a recent fraud case.

Two directors of Green’s, one of Britain's oldest wine merchants, were jailed for stealing £2 of million of fine vintages stored in their cellars for their customers - who included wine critic Oz Clarke.
Very little of the stock has been recovered. There is also a problem where investors buy ‘en primeur’. This is where individuals purchase the wine unbottled at the place of source. The wine is then shipped to England and laid down. In the past, individuals
have lost everything where the wine company has gone bust. This is because receivers have routinely seized all the bottles of wine as part of that company's assets. 

However, there is some light at the end of the cellar. A High Court judge ruled earlier this month that
bottles of wine in storage belonged to individuals not the wine company. You usually have to keep wine for at least three years to make a profit.

To receive profits from your investment you have to find a buyer for your wine, although brokers claim they never have problems finding buyers for good Bordeaux. To create an income from your wine investment, you have to own a large stockpile and sell part of it each year. 

On the plus side wine as an investment gives you more street cred than TESSAs and is not liable for capital gains tax because it is classed as a wasting asset.

The best bet is to invest in posh plonk. Lambrusco may be all right for fish and chips on the beach but not as an investment.
INCREASE
The New World wines may be popular but do not yet have an investment track record. Go for good Bordeaux. Chateau Mouton Rothschild has proved to be a better investment over the past 15 years than an index tracking fund. 

The Bordeaux Index, which is based on the vintages
of 60 leading chateaux has risen over normally produced in only the best vintages and often just by notable
chateaux. For example an Imperiale, equivalent to eight bottles of Chateau Lynch Bages 1970 would have cost £27.50 in 1975. By the beginning of this year the price had increased by 1,950% to £563.75.

IF YOU don't fancy your skills as a connoisseur you can leave the selection to wine brokers such as Allwines, Drummond & Co or Magnum Fine Wines, who will charge around five to 10% of the cost of the wine.
To check prices try Decanter magazine. Laying down your wine in a warehouse will cost you around 1.2- 2% a year including insurance.
You can sell through auctioneers, wine merchants or place an advertisement in a newspaper. if you know what you are doing. And remember, always take a good grasp of your bottles when handling them. In 1986 a wine lover paid £115,000 at auction for a 1797 red from the cellars of Benjamin Franklin. He promptly dropped it. 

.You may think that investing in vintage wine is purely for connoisseurs.
   But a new Bordeaux wine investment fund makes it easy. Drummond & Co. investment adviser and wine seller, has launched their Managed  Bordeaux Wine Investment Plan. For a minimum of  £2500, you will be able to invest in 25 of the top wines picked and traded by Drummonds  management  team.
As wine is considered to be a depreciating asset , no tax is payable on profits and you only pay inheritance tax on the original price.

Drummonds  wine investment plan has one major drawback
- it is not for those who want to drink the wine later. Those who want to imbibe should follow the example of Cheryl Seymour, a retired horse breeder from Leominster, Herefordshire. She has seen a 24% annual
increase in her purchases of £6000 in the last two years.
"I've always been partial to wine and I spent a few years practising!  I didn't realise it was such a good investment - and I can drink it."

You can buy and sell wine through Allwines, Drummonds and Magnum Fine Wines. Christies charges up to 10% of the hammer price if you are selling, and 10% if you are buying. Sothebys charges 10% - 15% for selling and 10% if you are buying.