You may call it a "liquid" investment, but UK advisers may be left 'wine'-ing after being told to stop promoting this racy investment.
Advisors in the UK have neem banned from promoting 'racier' funds, including those that invest in fine wines.
As an asset class, wine has been outperforming precious metals in 2013. According to a Bloomberg report the Liv-ex Fine Wine 100 Index tripled in the past 10 years while gold advanced fourfold. However, the wine gauge rose 5.9% this year while gold has fallen by about 16% in the five months to end-May.
The price rise has little to do with the ban. The regulator initiated the ban because of percieved widespread unethical sales practices (not out fear of a wine bubble).
The clampdown came after the Financial Conduct Authority (FCA) revealed that three quarters of people who bought the investments from an adviser were mis-sold the product, as advisers earned generous commissions to recommend the schemes.
Typically, the unregulated investments provided generous tax relief, or higher than average returns, but are by their nature far more risky as they are invested in illiquid (excuse the pun) and esoteric assets, which can be difficult to value and may be more volatile than conventional investments.
The FCA is not banning unregulated investment schemes outright. They can continue to be sold to more sophisticated investors provided that they have an income of more than £100,000 or assets of more than £250,000 (excluding their property).
