Nobles Crus valuation methods questioned

Wine investment fund Nobles Crus has had its valuation system called into question after evidence has come to light that it values its holdings at higher prices than its rivals.

The Financial Times has reported that the Luxembourg-based collective’s profits since its launch back in 2008 have come from unrealised gains from its inventory, not actual sales.

Belgian financial analyst, Jean Walravens, told the newspaper that the high returns Nobles Crus has been reporting, “do not reflect reality”.

Part of this discrepancy has apparently been achieved by, “taking the average of two prices from auction houses, without removing commissions, and two from wine merchants.”

As Liv-ex explained, its own method is based on, “actual bid, offer and transaction prices on the Liv-ex Fine Wine Exchange (i.e. the price merchants are trading the wine at in B2B transactions).”

Since launching in 2008 the fund has seen annual returns of 13% and grown to €109 million. It has attracted investors from across Europe and is thought to have a portfolio of some 54,000 bottles.

Its holdings in Bordeaux alone are thought to be worth €26m. However, while Nobles Crus has announced monthly gains since the start of September, Liv-ex – which was approached by the FT to help with the research – has seen a gradual slump of 23% since the highs of winter 2010 (something the drinks business has previously covered).

To highlight the difference, Liv-ex has posted a comparative list on its blog and explained its valuation practise further.

It is clear from the chart that the difference between Liv-ex’s valuation of Lafite 1996 (€855 per bottle) is markedly different to that of Nobles Crus (€1,718).

Taking into account the number of bottles each index has on its lists and their respective values, there is a 101% difference between the valuation of that wine on both platforms.

For Cheval Blanc 2000 the difference is 83% and Pétrus 1982 30%. As Liv-ex further explained, even a valuation of the top 50 holdings revealed a difference of 38%, with Liv-ex valuing its list at €26m and Nobles Crus at €36m.