Investors in fine wine have enjoyed their best year for ten years, making returns of as much as 90 per cent on the most sought-after vintages.

Chateau Lafite Rothshild 1998, one of the most actively traded wines, has soared in value from about £1,240 a case in January to £2,370 today — or from £103 a bottle to £198.

Even allowing for storage and insurance costs and the wide spread between buying and selling prices, investors in this claret have made a killing.Top quality burgundies and champagnes have also soared in value, boosted by growing wealth levels over the past few years.

Overall, fine wine prices are up by 45.7 per cent since January, according to the Liv-ex 100, a weighted index of top quality wines. That performance trounces almost every traditional asset class, from equities and bonds to property and hedge funds. It also beats many other collectables, such as rare postage stamps and gold.

James Miles, a founder of Liv-ex — the London International Vintners Exchange — attributed the soaring prices to a buoyant economy and accelerating wealth levels.

“Fine wine is basically a warrant on wealth creation and the past three years have seen an unprecedented amount of wealth created, not just in the City but in emerging economies such as Russia, India and China.”

Growing interest from professional investors and specialist wine investment funds had also pushed up demand and prices, he said.

Until the last couple of years, vintage wine prices have more or less stagnated since the Asian financial crisis in 1998, which marked the end of the last great boom in fine wine prices. Investors expect further price rises. Prices quoted by Spreadfair, the spread-betting firm, which takes wagers on movements in the Liv-ex 100, point to a further 6 per cent increase in wine prices by next April. That may understate the prospects for wine if even a fraction of the estimated £15 billion of City bonuses due to be paid out in January and February is diverted into wine.

“Until recently, wine hasn’t done much. It’s now playing catch-up,” said Mr Miles, a former analyst with BNP Paribas, who expects strong price growth again next year.

Mr Miles claims that fine wine has produced investment returns comparable with equities and property over the very long term, and also has diversification benefits because it is relatively uncorrelated with traditional asset classes. Better information and more trading of this traditionally illiquid asset class have also boosted interest. There are now three funds regulated by the Financial Services Authority investing £50 million in fine wine, Mr Miles said.

However, most financial advisers still regard wine as, at best, a fringe investment, only to be indulged by those who, if the market turns sour, can find more than enough consolation in drinking the stuff.

Bordeaux drives global sales

A fabulous 2005 vintage in Bordeaux, bigger-than-ever bonuses in the Square Mile, and a rejuvenated market for fine wine in the Far East have all led to booming fine wine sales (Joanna Simon writes).

The international fine wine market has spread out from Bordeaux and, indeed, France, but Bordeaux still dominated, accounting for as much as 75 per cent of trade.

This dominance is partly historic and partly because of the amount of wine produced, but it is also, crucially, because of its longevity. We may never see profits like those made by early buyers of the top 1982 Bordeaux, but wine is still a good investment if you follow the rules. Buy only the top châteaux/estates in the best years, such as Châteaux Lafite, Latour, Margaux, Mouton-Rothschild and Haut-Brion, all blue-chip names with a track record.

Also worth considering are the “super-seconds”. Châteaux Ducru-Beaucaillou, Léoville-Lascases, Cos D'Estournel, Pichon-Lalande and Léoville-Barton, along with Petrus and Le Pin from Bordeaux’s Right Bank. Others with a good track record include Châteaux Lynch-Bages, Palmer and Cheval-Blanc.

From Burgundy, consider Domaine de la Romanée Conti. From Italy, Sassicaia remains strong. Likewise, California’s Screaming Eagle and Australia’s Grange.