SHANGHAI Aug 23 (Reuters) – China’s DeRouge Fund plans to raise 1 billion yuan ($156 million) in the country’s first fund that invests in fine red wine, as stock market bearishness and rising inflation fears spur innovation in China’s competitive asset management industry.
The close-end fund, which targets wealthy individuals, will buy top red wine from France’s renowned Bordeaux and Burgundy regions, and expects to deliver annualised returns of 15 percent, according to its sales document.
“For China’s growing affluent class, there’s huge investment demand for alternative assets such as precious metals, commodities, private equity and art collections,” said Zhang Haochuan, head of research at fund consultancy Z-Ben Advisors.
“Red wine, like other storable goods with limited supplies, has the potential to beat inflation.”
For example, the Vintage Wine Fund, managed by London-based OWC Asset Management Co, has risen 67.2 percent since inception in 2003, according its July report.
Chinese investors’ desire to preserve the value of their assets against stubbornly high inflation and market volatility has spurred a series of financial product innovations this year.
Lion Fund Management Co this week launched China’s first mutual fund that invests in overseas real estate investment trusts (REITs), after successfully launching in January the country’s first gold fund — the best-performing mutual fund so far this year with a 28 percent return.
Fofund Capital this week launched Shanghai’s first privately-run fund of funds, seeking to identify winners in a mutual fund market crowded with more than 800 competing products.
DeRouge Fund, which aims to raise 200 million yuan in its first tranche, will start taking subscriptions from investors next month, with a threshold of 1 million yuan from individuals and 10 million yuan from institutions. The fund has a lock-up period of five years.
“China’s stock market has been sluggish; investment in the real estate market has been banned, so high-net-worth individuals in China desperately need new investment channels,” said David Zhang, marketing chief of the Beijing-based fund.
“Top red wine is limited in supply and their value is likely to rise in the long term as China is set to become the world’s third-biggest market for top wine.” (Reporting by Samuel Shen and Jacqueline Wong)