Ones and zeros may dictate the world, but those same data points reflect a new generation of professionals bent on living a comprehensive and sustainable life. Millennials and Gen-Z are integrating their consciousness into the careers they choose, the cities and homes they live in, and the journey their earned money takes along the investment trail.
The younger generations aim to rebrand what an authentic life looks like not just Monday through Friday, but 24-7 and through the vertical of their respective lives. Many work for companies focused on Diversity, Equity, and Inclusion (DE&I) and Environmental, Social, and Governance (ESG) targets. Along the way, some are investing in new ways to enjoy old pleasures.
Michael Doerr, CEO of Oeno Group, an investment advisory service in collectible wines, is trying a different approach to the investment model. The International Investor Awards named him the Wine Investment CEO of the Year Award for 2022, with the company awarded Best Global Wine Investment Firm two years running.
Doerr’s mission from the beginning has been to bring something different to the world of investing. It’s a full life cycle approach that connects a long-term investment model to the culture of wine enthusiasts.
Nothing is ever recession-proof, but Doerr operates multiple offices worldwide, knowing that wine is celebrated during the good times and embraced during nail-biting periods of economic unrest.
Understanding Fine Wine Investment
For those with little understanding of an investment advisory for wine, Doerr explains the concept.
“It’s the investment in the appreciation of fine wine. Many people are unaware that they can invest in wine and that it rises in value,” says Doerr. “It represents about 5% of the wines on the market and is closer to pieces of fine artwork made in the most extraordinary ways and low in production with a huge following behind them. Asset appreciation works with supply and demand. As time passes, fewer bottles are on the market, and the price appreciates.”
According to Doerr, adding to the investment lifecyle, once the wine is bottled, it’s still evolving. “For instance, it can take 10-to-15 years for a Bordeaux to reach that ‘drinkable window’ state,” adds Doerr. “As a company, we buy [wine] stock early on, our investors and collectors hold on to that stock, and then we release it back into the market. By that time, it’s risen in price through supply and demand. Because the wine has evolved, it’s now drinkable at a high price.”
While some view the younger generation as a fast-moving crypto-buying segment, many young investors are more interested in long-term opportunities and tangible strategies to address the uncertainties of their financial futures. Doerr stresses that fine wine investment is not a highly liquid asset but a more sustained investment strategy.
“It acts more like a property waiting for a buyer to come into place that can take a year or two to sell,’ he says. “It should be treated more as an Incentive Stock Option (ISO) and part of a diversified portfolio. In most countries, it’s capital gains tax-free.”
Part of the appeal is the global market and volatility-free component. “When the market is thriving, everyone’s making money and spending money on wine. When the markets dive, everyone’s still spending money on wine, drinking more to get through the issue at hand,” states Doerr.
Doerr opines hypothetically if the U.K. stopped consuming wine altogether, it doesn’t make a difference to investors because consumers are still readily available worldwide. “We were tested when the Russia and Ukraine crisis happened,” adds Doerr. “Suddenly, no one could import into Russia, a big fine-wine-drinking country. But we saw no change because all the excess wine that would have sold in Russia was soaked up by China, India, the U.K., or North and South America.”
While many companies offer wine investment, the Oeno Group approach is unique because it improves on an old model by concentrating on all aspects of the wine life cycle. When Doerr approached this sector, he didn’t want to start up another wine investment company but looked to see how he could improve the model.
“I saw from the investment standpoint that the cycle was broken. I love it and put everything into it because there’s a lovely natural life cycle attached,” says Doerr.
“There are multiple investor-to-investor tie-ins created through a seamless and sustainable process. As soon as you find that consumer, you can sell assets at a profit to a happy consumer on the other end. Money is made, and the consumer can hold the asset or enjoy a beautiful bottle of wine with friends and family. It’s the most lovely life cycle of an investment.”
Doerr explains that with most other asset classes, someone along the way is losing out. But with fine wine, a different dynamic exists. “In fine wine, as long as you can bridge the gap between the collector and the investor to the consumer, it’s a match made in heaven,” he says. “The whole thing marries up.”
A spike in interest is growing within the younger generation. Five to ten years ago, fine wine investment was more of an old-fashioned model with an appeal to older segments of the population.
“We’ve tried to be a much newer, younger company open to the opportunities of everyone,” says Doerr. “We’ve seen huge growth in the younger generation (25-to-35-years-old) that are taking an interest. That generation appears more proactive in investments to find choices that match their lifestyle. They recognize that they need to make their money work harder than their parent’s generation.”
The Oeno Group is developing educational models as part of its future offerings. An online academy is already taking shape to educate more people on fine wine and investment. The goal is to share knowledge through podcasts and other sources so people can make their own decisions. It’s a financial literacy angle with fine wine at the helm.
“I think education is such an important tool. I’m a huge advocate for getting out there and educating investors on how this asset class works while bringing more attention to it,” shares Doerr. “No matter the age group, it’s significant on our radar to ensure we’re educating investors on how to invest safely in the sector.”
According to Doerr, the industry average market returns are usually between 8% and 12%. However, over the last three years, the Oeno Group has seen numbers climb toward the top of the spectrum. Last year alone, the rate of return for Oeno clients reached 15.56%.
Classic investing resembles traditional western education based on tried-and-true methods mitigating market risks in the name of stability, if not predictability. Financial literacy reaches into communities and empowers its respective citizens to craft a strategic path of financial independence.
Doerr, with returns that regularly exceed expectations, is laying a foundation of sustainable and enjoyable investing that allows the next generation to sip their returns while taking on a more vintage lifestyle.
Interviews have been edited and condensed for clarity.
Tiger Global is raising a private equity fund that will target $6bn in investment, less than half the amount raised for a prior fund, as the prominent technology investor slows its once-breakneck pace.
The fundraising began on Thursday, according to a letter sent to limited partners and obtained by the Financial Times. Chase Coleman, Tiger’s billionaire founder, has been seeking investors willing to buy into the technology downturn that has battered his group’s portfolio.
Tiger’s preceding private equity fund of $12.3bn closed in February. The $6bn private fund is below early targets of about $8bn, according to a person familiar with the situation.
People close to Tiger believe the new fund’s smaller scale of investments will match lower valuations after the market rout this year.
The group has promised it will invest less than half the fund in its first year, a more measured pace than the prior fund, which is already mostly invested. The size of Tiger’s typical investment has also been nearly halved to about $30mn.
The letter said Tiger would attempt to take advantage of opportunities such as secondary sales of private technology companies whose values have fallen in the financial market downturn.
The diminished fundraising and defensive approach come as the $63bn-in-assets Tiger confronts upheaval. Its flagship fund fell about 50 per cent this year to July, according to documents sent to limited partners, while it has marked down its more than $45bn portfolio of private technology investments each month this year, it recently told investors.
The fund group has also experienced turnover among investment staff. On Monday, Tiger announced that former partner John Curtius, who headed the firm’s software and business services private equity investments, would be leaving.
Curtius had been expected to temporarily stay on following the announcement to ensure an orderly handoff of his portfolio to others inside Tiger. “John will work closely with other investment team members over the coming months to transition his responsibilities,” Tiger said on Monday.
However, as of Thursday he was no longer an employee, said three people familiar with the situation. Curtius is planning to launch an investment firm called Cedar Investment Management, people with knowledge of the matter said.
Curtius had been one of Tiger’s most prolific investors, leading more than 100 venture capital investments, according to PitchBook data, including investments made as recently as September 27.
This week, Tiger Global fielded questions at meetings with limited partners who sought to get a better understanding of Curtius’s sudden departure, said two people directly involved with the matter.
Coleman and Scott Shleifer, head of Tiger’s private investment business, decided this summer that Curtius would leave the firm amid concerns over the autonomy he was seeking in managing an increasingly large portfolio, people close to Tiger said.
Internally and in discussions with limited partners, Tiger has described itself as a collaborative firm, with investors overseeing public and private investments in the US, Brazil, India and China working closely together to identify investments.
People close to Curtius painted a different picture. In recent months, he had been looking for the opportunity to start his own firm to capitalise on a dramatic reset in valuations across the industry, they said.
(Bloomberg) — South Korea’s growing direct overseas investment is among the factors piling pressure on the won amid its slide to its lowest levels since the aftermath of the global financial crisis.
While the Federal Reserve’s rapid policy tightening is the most obvious reason strengthening the dollar against a whole host of currencies across the globe, Korea’s foreign direct investment is a lesser-known long-term factor weighing on the won.
Foreign outflows are likely to keep increasing as Korean firms look to expand overseas given the slowing domestic market and pressure from the US to invest more in operations there.
The nation plowed a net $89 billion into economies overseas via direct foreign investment and purchases of stocks and bonds in the 12 months to August, a nine-fold increase from a decade ago, according to the country’s balance of payments data.
That has contributed to a depreciation in the South Korean currency. The won recently hit its weakest since March 2009, despite the Bank of Korea stepping in to help curb losses through repeated interventions. The won has been Asia’s worst performer after the yen this year.
The possibility of more outflows poses a challenge for a central bank that is increasingly concerned about a weaker won raising import prices and fueling inflation. The BOK meets next week and may need to return to larger rate increases to help support the currency by closing the gap with US rates.
“We used to be worried only about foreigners leaving, but now there’s a lot we have invested abroad and we plan to make the case that bringing it back is good for both investors and the national economy,” BOK Governor Rhee Chang-yong told lawmakers. “If our overseas investment is repatriated, it gives us more room to not raise rates.”
Rhee didn’t propose steps to encourage repatriation of investment during his comments. The Finance Ministry on Monday denied a Yonhap news agency report that the government was looking into tax breaks for investors who bring back money after selling shares abroad.
“If overseas investment increases continuously over the long term, excess demand for dollars piles up and eventually serves as a factor raising the currency rate,” said Min Kyunghee, a researcher at the Korea Chamber of Commerce and Industry in Seoul. “It seems unlikely the rate will drop sharply even if the Fed eases tightening later depending on economic situations.”
While the more volatile swings of the larger portfolio investment flows typically gain more attention among market watchers, the steadier building up of FDI presents more of a structural weakening factor.
Korea is investing more money overseas compared with many other nations. The country’s annual outward FDI as a proportion of gross domestic product is the highest among Asia-Pacific countries tracked by the Organization for Economic Co-operation and Development. Among the Group of 20 nations, it trails only the UK, Germany, Russia and Canada.
In an indication of the increase in operations abroad, sales by Korea’s overseas corporate units rose 71% to $368 billion in 2019 from $215 billion in 2010, with key products such as semiconductors, smartphones and cars accounting for almost two thirds of the gain, BOK researchers said.
The growing competition between the US and China is another factor pushing Korean firms to invest overseas, with companies such as Samsung Electronics Co. particularly vulnerable to US pressure because they rely heavily on American technology and equipment to produce semiconductors, batteries and other goods.
Korea’s direct investment in the US amounted to a net $28.4 billion in the past year, a near five-fold increase from a decade ago, according to data from the Export-Import Bank of Korea. In the same period, investment in China rose two-fold to $7 billion, the data showed.
Even more Korean money may flow to the US as the administration of President Joe Biden expands efforts to reshore manufacturing. Korea’s high-tech firms are pivotal to the American effort to realign Asian supply chains to reduce reliance on China.
In May, Biden visited a Samsung chipmaking plant in Korea and touted Hyundai Motor Co.’s pledge to invest more than $10 billion in the US. Last month when Korean President Yoon Suk Yeol visited the US, the chairman of SK Inc. Chey Tae-won said in Washington that his conglomerate plans to raise investment in the US to more than $50 billion by 2025.
“Direct investment has long-term, structural influence over capital flows,” said Choi Don-Seung, an economics professor at Andong National University in Korea. “How the US-China competition plays out will matter to the status of the dollar and how Korea positions itself will be important.”
“We can’t say, ‘If you weren’t acting so emotionally, you would be able to make better financial decisions,’” she told attendees at the Investments and Wealth Forum in Toronto on Monday. “Everything we do, including financial decisions, requires emotions as an impetus. So we can’t ignore what’s going on in this deep region of our brain.”
This makes the role of an advisor — someone who can provide an objective, third-party perspective — that much more important. Similar to advisors managing a client’s risk, they may need to manage their emotions, Kramer said.
One example of emotions governing investment decisions is the correlations between seasonal affective disorder, investor behaviour and market performance — a phenomenon Kramer and her colleagues have studied for more than 20 years.
Kramer highlighted that traditionally, September and October are poorer-performing months for the market. The S&P 500 has seen a September decline of 7% or more 11 times going back to 1928, according to MarketWatch. While Octobers have performed better than Septembers, significant market crashes, like in 2008, 1987 and 1929, have occurred in October.
Both months are when days begin to shorten in the northern hemisphere, which can dampen moods among the general population. “We all just feel a little more despondent,” Kramer said. “The more depressed a person is, the more averse they are to risk, including financial risk.”
Kramer said her research has found that the riskiest categories of U.S. mutual funds tend to see large outflows during the fall and winter, when many investors experience increased risk aversion.
Conversely, she has found there tend to be large flows into the safest categories during these times.
Advisors who know about this tendency can educate their clients and help them avoid it.
“If investors act according to their emotions, if they sell risky assets in the fall and buy them back in the spring, they’re going to end up worse off. They’re leaving a lot of money on the table,” she said. “[You] don’t want people making investment decisions that is responsive to strong emotional urges.”
John Nersesian, head of advisor education with PIMCO, said during another session at the forum that advisors can help manage clients’ emotions by presenting them with historical data and evidence about how tumultuous markets in the past occurred and how investors who stayed invested rode the recovery wave.
Advisors should also show empathy to their clients, he said. As an example, advisors should consider revisiting the common phrase “stay the course.”
While advisors mean clients should remain invested and take a long-term approach, clients may interpret the phrase differently, Nersesian said.
After hearing the phrase, they may think: “I’m telling my advisor I’m in real pain right now. My portfolio is getting killed. Everything I’m reading suggests this may continue. My advisor doesn’t hear me; my advisor is hearing me, but they don’t care; [or] my advisor doesn’t have anything better to offer me.”
Nersesian suggested that instead of telling clients to “stay the course,” advisors can reiterate and clarify their clients’ concerns, tell the client they will examine potential options and reconnect with them in a week to discuss the best action plan.
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