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Calls for recognised norm for valuing wine funds

Published:  04 October, 2012

Wine investment companies are calling for a transparent method of valuing wine funds.

Last week, the value of Luxembourg-based Nobles Crus' wine fund was called in to question by the Financial Times newspaper. The article said Nobles Crus values its wine investment fund at a higher price than those used by its rivals.

The FT used Liv-ex to perform a comparative valuation. The company valued Nobles Crus' 50 largest Bordeaux holdings at £26 million. Nobles Crus values them at £36 million.

Jack Hibberd from Liv-ex said: "Since 2009 we have more than doubled the number of funds that we value. There are now ten fund that use our official valuation measure, including all of the major UK funds. The Liv-ex Mid Price is increasingly viewed as the industry standard, as it enable wine funds to mark their holdings to market in a transparent manner. The Liv-ex Mid Price is, in essence, the price that merchants and traders are buying and selling the wine for at the time of valuation."

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."

EF Wines director Jon Barr said there's a need for transparency but warned that there will always be price changes. He said: "It does make sense that the market needs a level of transparency but there will always be discrepancy with prices. For example, a wine collector needs evidence of provenance, and this will have a major effect on any valuation."

Independently, EF Wines uses Liv-ex and winesearcher. Barr added: "For us a valuation is often a balanced assessment across a range of prices, where we will look to the mid-range consensus and discount the very high and very low."

Nobles Crus has posted annual returns of 13% since its creation in 2008, according to the FT. The article quoted Belgian independent financial analyst Jean Walravens, who made the point that Nobles Crus' high returns "do not reflect reality".

Barr told Harpers: "The issue is that we do not see any evidence that people are paying these prices. It's easy to maintain the impression of growth, but I would be dubious of any graph that shows a smooth upward path when my experience as an active buyer in the market is that prices have fallen significantly over recent times. In fact, the First Growths have fallen to such a degree that we now consider that many of them represent a good buying opportunity when compared to their price a year ago."

Nobles Crus is yet to comment.