Decanter World Wine AwardsLiv-ex and Nobles Crus trade accusations of unreliability
- Friday 26 October 2012
Richebourg Henri Jayer: 'unreliable' pricing?
Following questions over the valuation of its wine fund, Nobles Crus parent company Elite Advisers has called in Ernst & Young to carry out an ‘independent third party review of the fund’s portfolio, valuation and valuation methodology’.
It has also sent a seven-page letter to investors setting out a robust defence of the fund’s valuation processes.
In the letter it accuses online trading platform Liv-ex, which had been asked by the Financial Times to verify Nobles Crus’ pricing, of providing ‘unreliable’ data.
It said the net asset value (NAV) of its fund on 30 September 2012 was €114.4m
‘The current valuation methodology supports the published NAV as signed off by the fund’s auditors Deloitte on April 23 2012,’ it said.
The letter says despite Liv-ex’s ‘claims to be comprehensive, it only provides regularly updated pricing for a proportion of its coverage, mostly Bordeaux wines'.
‘Liv-ex, which is both a data source and a trading platform used primarily by UK merchants, claims to record market prices. However, from our own analysis, many prices quoted are not supported by a transaction, or were last traded so long ago that the price is no longer reliable.’
The letter cites Liv-ex valuations of Lafite 2009 and Domaine Henri Jayer Richebourg 1985.
‘Chateau Lafite 2009, valued by Noble Crus in August 2012 at €1,210 and €1,155 in September. The price quoted on the Liv-ex data base, according to Press reports, was €744. However, given a consignment was sold in September in Hong Kong for €1,199 we believe our valuation is entirely reasonable. Moreover, when we checked on October 8, 2012, Liv-ex was quoting a price of £1,166.7 (€1,432.66), against which the Nobles Crus valuation looks very conservative.’
For the Henri Jayer, Elite says while Liv-ex quoted €8,281 in contrast to Nobles Crus valuation of €15,573, the wine was ‘last traded at Christie’s, again in Hong Kong, for €32,000’.
In response Liv-ex says Elite Advisers has read its data ‘incorrectly’.
‘The investors’ letter dated 19th October incorrectly uses Liv-ex data and shows a misunderstanding of what Liv-ex is and how it operates. Only one of the prices they attributed to Liv-ex (that for Lafite 2009 at €744) accurately states the price we would use for valuation. Liv-ex only values wines where robust (preferably transactional) data is available.
‘At no stage have we suggested that Nobles Crus has not valued their stock according to their published methodology. We simply believe that their methodology, a combination of average merchant and auction prices, is inappropriate.
‘We have offered to help the fund, its advisor and Ernst & Young with their review of the fund’s NAV and to provide data and our expertise for free. To date neither the fund, its advisors nor Ernst & Young have contacted us.’
Have your say!
P. Bevat
October 30 11:11
The problem with the valuation of fine wines through Liv-ex, is something which happens more often in the market. Liv-ex is working with many UK merchants, this also includes second hand buyers. The problem which occurs here is that these merchants, which have bought older vintages years ago, now put small quantities on the market for lower prices. This somewhat falsifies the price because it contains small single offers.
This makes Liv-ex a good place for other merchants to buy some attractive deals, but it doesn’t provide anything stable in a long term view. Funds like Nobles Crus, needs to be valuated conservatively through marketprices which are traded on a day to day bases which makes notice of more variables.
These variables are for example the value of larger stocks, provenance, etc. I know that there is a system (eleanor-wine.com), which gives their clients insight in the prices of the négociants. The négociants trade fine wines on a daily basis and this system gives insight in the lowest, average and highest prices of all fine wines in the Bordeaux market. (Same as in Liv-ex, the identity of the buyer and seller are not disclosed but it does offer a direct buying possibility) Variables as stocks & provenance (which are important for funds) are, as most people in the business know, included in prices of négociants. Unfortunately this system is also for members (b2b) only.
P. Bévat
October 29 20:27
The problem with the valuation of fine wines through Liv-ex, is something which happens more often in the market. Liv-ex is working with many UK merchants, this also includes second hand buyers. The problem which occurs here is that these merchants, which have bought older vintages years ago, now put small quantities on the market for lower prices. This somewhat falsifies the price because it contains small single offers.
This makes Liv-ex a good place for other merchants to buy some attractive deals, but it doesn’t provide anything stable in a long term view. Funds like Nobles Crus, needs to be valuated conservatively through marketprices which are traded on a day to day bases which makes notice of more variables.
These variables are for example the value of larger stocks, provenance, etc. I know that there is a system (eleanor-wine.com), which gives their clients insight in the prices of the négociants. The négociants trade fine wines on a daily basis and this system gives insight in the lowest, average and highest prices of all fine wines in the Bordeaux market. (Same as in Liv-ex, the identity of the buyer and seller are not disclosed but it does offer a direct buying possibility) Variables as stocks & provenance (which are important for funds) are, as most people in the business know, included in prices of négociants. Unfortunately this system is also for members (b2b) only.