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December 2019 investment update

November was another positive month for global equity markets, writes our Head of Investment Management, Simon Black. Our December monthly investment update is now available to download and view online.

China leading the world in 5G

The race is on to connect people and things to 5G. For the moment, China is winning. But what makes 5G so important – and why is the US worried about Beijing’s head start? Jay Williams, Dolfin’s Head of China Desk, reports

Dolfin celebrates the best of 2019

During Advent 2019, we are celebrating a year spent uncovering the people, ideas and technologies shaping your investment landscape.

Tech and the art of winemaking

Humans have been making wine for more than 6,000 years – but today, technology is revolutionising the way wine is produced, presenting new opportunities for collectors and investors. Simon Black, Senior Wealth Manager at Dolfin and a wine enthusiast, explains.

29 January 2019 / Technology

Over the past 30 to 50 years, the use of technology in wine production has increased rapidly, impacting all areas, from the harvesting of grapes to the bottling and sealing of the bottles with the finished product inside. Winemakers are increasingly able to understand the environmental factors that impact the quality of the finished product, and the different stages of production of wine, and more and more of them are using laboratories to scientifically test the chemical make-up of the wine.

Crucially, the use of technology in winemaking has removed some of the uncertainty in growing and harvesting fruit – the licking of a finger and waiting to see which way the wind is blowing – enabling producers to make quality wine even when they’ve had bad weather, albeit with much lower yields. This has meant that, if we look at wine scores going back over the past 30 or 40 years, and especially the past 10 to 15 years, we notice that the concept of bad harvests doesn’t really exist in the way that it used to.

Wine investors have seen a reduction in volatility.

If there’s been too much sun, too little sun, too much rain or not enough rain, technology can help producers understand the optimum time to pick the grapes. From a winemaking perspective, this allows producers to understand the optimum additions that they need to make at each stage to produce the best possible wine, given the circumstances they’re in. And from a portfolio management perspective, it means that investors have seen a reduction in volatility, because there are no longer such extreme fluctuations in the quality of a wine from year to year.

Chemical reaction

The application of science to winemaking involves both chemistry and technology. To put it simply, the more ripe the grapes, the more sugar is in the grape juice and therefore, the more alcohol is produced. Winemakers today are able to use specifically cultivated bacteria or yeast to have a particular impact on the alcohol production levels and adjust the amount of sugar that is present in the fermenting grape juice. They are also able to control very precisely the amount of oxidisation that takes place, using liquid and gas chromatography and mass spectrometry. And, throughout the fermentation and bottling process, a huge number of machines that filter, bottle and cork the wine, are all controlled by computers, making technology intimately involved in the wine production process.

No technological advancement has been able to replicate the sensitivity of the human nose.

This is particularly important for mass producers of the kind of wine we buy in supermarkets. For them, and for their consumers, what is most important is a reliable, consistent product. Also, the majority of wine that’s purchased in UK supermarkets is drunk within a few hours, so there is no need for wine to mature and improve over many years. In turn, there is no longer a need for small amounts of oxygen to enter the wine through the cork as it ages, and screw-top closures are used.

However, it would not be true to say that winemaking has moved from being an art into a science. The winemaker is still behind all the decisions that are being made, and no technological advancement has been able to replicate the sensitivity of the human nose. What technology does is marry the knowledge and expertise of the winemaker and with the tools that have been developed to enable them to achieve, if not new highs in winemaking, more consistent and higher levels of winemaking.

Liquid assets

For wine collectors and investors, technology has come in to assist from an entirely different perspective. Venerable wine merchants such as Berry Bros & Rudd now have online portals through which their customers can buy wine and keep track of what they have held in bond, as well as viewing other clients’ wine and bidding on stock they wish to purchase. They can maintain an up-to-date inventory of what bottles are stored where, under which customer. In the past, collectors would have to go through an arduous process of phone calls and invoices going backwards and forward, but now it’s all done online.

When collectors sell wine frequently, the commission payable to the merchant can start to bite: this ranges from 5 to 10 per cent, which is very, very high in comparison to other investments. As more providers invest in technology that allows buyers and sellers to be matched and to trade directly with one another, I would expect to see this commission dropping significantly, which will introduce more liquidity – pun intended – into the wine market.

In the UK, we’ve also seen a large number of entrepreneurs setting up with a focus on essentially trying to sell nice quality wine to wealthy individuals. Especially in the London area, there is a plethora of them now that are all trying to identify their unique selling point and increase the number of clients buying through them. Their cost base is decreasing, because technology has removed the need to have a big store or showroom. However, it’s not an area where I have seen a large influx of capital, because people are doing it more out of passion and interest in wine along with the ability to make money.

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Founded as a London-based wealth boutique in 2013, today we’re a diversified financial services firm with an international presence and our own bespoke technology platform.

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