View the article online at http://citywire.co.uk/money/article/a623482
Nobles Crus says it will change valuation on wine fund
Nobles Crus, one of the world’s biggest wine funds, is overhauling the way it values fine wines amid questions around its performance history.
Nobles Crus, one of the world’s biggest wine funds, is overhauling the way it values fine wines amid reports in the Financial Times questioned its performance in the past four years.
According to the paper the Luxembourg-based fund has posted an annual return of 13% since launch in 2008. It has also reported consistent gains every month since early 2011, even though the widely used Liv-ex Fine Wine 100 index has fallen 23% in that time.
Liv-ex, which operates a wine-trading exchange and provides valuations for 10 other wine funds, was asked by the Financial Times to look at Nobles Crus’ top holdings. It valued the top 50 at €26 million (£21 million) much lower than the €36 million (£29 million) valuation applied by Nobles Crus.
Jack Hibberd, head of data at Liv-ex, told Citywire: ‘We’re very sure that our valuation method is robust and of the wines that we have valued we feel that they’re around 35% premium to the market value.’
One of the wines, a Lafite Rothschild 1996, was valued by Nobles Crus at €1,718 (£1,376), more than double the Liv-ex price of €855 (£685).
Hibberd said some of the wines in the portfolio could also be difficult to price due to a lack of trading in that stock.
‘Having looked at Noble Crus portfolio there are some wines in there that we would decline to value as they are so illiquid that they are virtually impossible to give a fair market value to and as they’re hardly ever tested in the market place as they’re so rare and old’, he said.
Although a highly specialist sector, interest in wine funds has grown as investors have sought out alternative assets that are not correlated to a struggling stock market.
Nobles Crus is managed by Elite Advisers and has grown to €109 million (£87 million). It is an unregulated collective investment scheme in the UK. The Financial Services Authority is in the process of banning the promotion of such schemes to the British general public.
Elite Advisers says Noble Crus values its wines by taking the average of two prices from auction houses, without removing commission, and two from wine merchants.
The fund reports its net asset value (NAV) every month based on this methodology, as it says other valuation approaches aren’t specific enough for itsportfolio. It holds 54,000 bottles of wine and claims to be unique in investing in Bordeaux grands crus and Burgundy premier crus from France alongside top wines from Italy and Spain.
Liv-ex valuations are based on actual transaction prices on its Fine Wine Exchange, which it says make it the most accurate source of prices.
However, Nobles Crus has now said it will change its process.
In a statement Véronique Cioli of Elite Advisers said: ‘Nobles Crus is constantly striving to improve its procedures and has been working, since the beginning of this year, on an automatic and scientific valuation system with two renowned finance professors who have no financial interest in the wine market. This valuation system will be implemented next year.’
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by James Carthew on Dec 22, 2014 at 10:50