|Wine investment fund Nobles Crus answers critics|
|Written by Gemma McKenna & Lucy Britner|
|Wednesday, 24 October 2012 15:32|
Nobles Crus, the fine wine investment fund that was recently lambasted over its performance and how it is valued, has responded to critics.
An article in the Financial Times earlier this month called the firm’s valuation methods into question, saying it valued its wines at a higher price than that used by rivals.
The FT’s article asked Liv-ex to conduct a comparative valuation of the fund and the resulting analysis placed Nobles Crus’ 50 largest Bordeaux holdings at £26 million, whereas Nobles Crus placed them at £36 million.
However, in the past number of weeks, Elite Advisers, which sponsors the Nobles Crus fund, has been determined to repair the damage to its reputation and show that its methods are fair. It engaged the services of Ernst & Young as well as a wine auction house to carry out an independent valuation.
The preliminary reviews found that the net asset value at September 30, 2012, was EUR 114.4 million, and that its valuation methods were robust.
When it comes to its performance, the company stated that although some wine funds had fallen sharply in the last 12 months, it had held up well. It attributed this to the spread of wines across its portfolio - while Bordeaux’s may have fallen, Burgundies and New World wines have offset losses.
It criticised Liv-ex, saying “pubished indices need to be treated with care”. “The Liv-ex 100 only covers 18% of wines in which Nobles Crus is invested, with a strong bias to more recent vintage Bordeaux wines”, while its portfolio is around 50% Burgundy.
It cited “intangible factors” such as provenance, condition, quality and whether the wine was bottled by the chateau or distributor as having an effect on price. It also claimed its size allows it to source wines at better prices. Measuring itself against a variety of indices it considers “more authoritative” than Liv-ex, it found its performance “makes sense given the composition of its portfolio”.
But Elite Advisers admitted that there is “an appetite for a valid benchmark for this asset class” and said it was working with a Swiss University to create a robust index “in which the entire industry can have confidence”.
It also defended its valuation process - saying it takes the average of four prices from a list of 60 wine merhants and 10 auction houses, and double checks the data with Winesearcher.com, and triple checks it yusing wine valuatio expert Laurent Vialette. It is finally checked by the group’s deposit bank CACEIS and audited by Deloitte.
The seven-page letter to investors signed off, saying, “we are very jealous of our reputation for professionalism, skill and integrity, and have taken the best possible advice on the measures necessary to demonstrate we are worthy of your continued trust.”
What the rest of the trade thinks
Hibberd states in a blog post earlier this week why Liv-ex data is used as the industry standard.
Founder of wine investment brokers Vin-X Peter Shakeshaft said there was a need for a recognised norm. Shakeshaft’s firm uses Liv-ex. He said: “If private investors are to believe the value of a wine investment fund, then it is in everyone’s interest to use the same [valuation] structure. Then you can determine how successful one fund is over another.”