November 20, 2011
First investment fund specializing in Chinese wine, Dinghong Fund (鼎红基金) wants to enjoy the excitement of millionaires for the great French wines. The fund offers them a placement combining profitability and taste for claret or burgundy.
“Once you have tasted French wine, you’ll not turn back,” said its founder Ms.Ling Zhijun (凌志君), who “drinks red wine for more than ten years” and found the wines from New World, like Chile, New Zealand or South African are “more standardized, like the coffee at Starbucks.”
After founded in September, the company has received the green light to raise money, Ms.Ling bought first bottles of great Bordeaux chateaux, but not necessarily the most expensive ones as the Lafite whose prices have soared in China. And also some burgundy wines, which are much less known to the Chinese.
To invest in Dinghong Fund, you will have one million yuan available, and block the money for at least five years, after which the fund agrees to sell the bottles for the customers who would like to get their capital.
“We rely on an ROI of 15% per year,” said the businesswoman who previously worked as a portfolio manager at Pacific Asset Management in Shanghai (east).
Reserve funds from a wealthy customer as it allows to exclude speculators tempted by more lucrative short term investments.
Ling Zhijun expects to “raise 200 million yuan by the end of the year, then the same amount each year for five years” to bring the fund to a total of 1 billion yuan.
The growth in sales of French wine in China reached 50% to 60% per year. In 2004, they amounted to 11 million euros, and in 2010 to 277 million. “In the first six or seven months of 2011, it already exceeds 200 million euros,” said Helen Hovasse, head of the agriculture division of Ubifrance in Shanghai.
“For Chinese consumers, we can say that wine symbolizes France,” she summarizes.
The great vintages arrived in China from Hong Kong, where taxes on wine imports were abolished in 2008. “As real estate is very expensive in Hong Kong, many great wines were sold in speculative market and the Chinese have rushed into it,” says Hovasse.
Dinghong Fund plans to buy 40% of its wines at the premiere sales organized by Bordeaux merchants, and the remaining 60% in bordeaux or burgundy just bottled wines, the aging period is 10-15 years.
Other private equity funds in China less specialized than Dinghong already offer wine to their customers among other products, such as Domain AMC, whose director Max Wang invested “10 million yuan in the French red wine, mainly of Bordeaux.”
The appetite for fine wines is also reflected by the launch this year a stock of red wine in Shanghai, on which exchange Lafite, Latour and wines of Margaux, Mouton-Rothschild and Haut-Brion, sometimes more than 13,000 yuan a bottle.
“The demand growth in China is just beginning,” said Wang Jiaqi, director of marketing of this exchange platform which already has more than 2000 customers after four months of operation.