Advisers in the UK have been banned from promoting ‘racier’ funds, including those that invest in fine wine.
The clampdown came after the 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).
Advisers in Australia seem a bit more clear-headed on the topic. Tony Bates, director of Bluepoint Consulting says, “I would not touch these investments with a bargepole…But I‘d love a consultancy with the liquidators.”
Bates cites an art bank fund that Warwick Evans, ex Macquarie, now NAOS asset management, came “peddling” to him some years back. “I don’t think it got out of the gallery.”
There has also been liquidation of wine storage groups, almonds, alpacas and mushrooms. However, Bates isn’t opposed to investing in wine completely.
“Many years ago I had 12 bottles of 1990 Grange Hermitage in my personal SMSF. It was my most liquid investment – Cost $130 per bottle, value today over $1000 per bottle. Compound annual rate of return over 10%pa, better than Macquarie Bank!
“Trouble is the Super Fund Auditor wanted to make sure it was really Grange. Every year we had to open one bottle to test it. So sadly this investment lost its value during the GFC.”
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