Liv-ex has vigorously defended its valuation methods after accusations of unreliability by wine fund Nobles Crus.
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.’
Written by Jim Budd and Adam Lechmere