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Friday, 12 October 2012

Nobles Crus Wine Fund: are the Burgundy valuations realistic?

In the cellars of Patriarche (Beaune)

Yesterday I posted on Jim's Loire an extended and updated version of the news report, which was published on on Monday 8th October. It includes more details on some of the Burgundies that form part of the fund. Although I have only looked at a small sample of the Burgundies in the fund, it does suggest that the questions raised on the valuation of this fund extend beyond Bordeaux. 

The controversy over the valuation of the Nobles Crus wine fund certainly points to  the need for an agreed way of valuing wine funds so that investors can judge and compare their respective performances using a valuation that is both robust and independent. 

Link to post on Jim's Loire  


  1. The problem with Wine Fund valuations is that the valuation companies do not really understand 'real' market dynamics. NAV (net asset value) should be valued in line with the redemption rights of the fund. If the fund has annual redemptions paid on 90 days, then the fund should be valued as a Net Realizable Value at 90 days.

    If the fund manages 20m and had to sell all the wine in 90 days, when demand is the biggest factor for value, we all know what would happen to the prices.

    What worries me is that the fund earns its fees based on these high valuations, by taking fees on over valued NAV's the potential realized price for the wine is eroded, often the fund pays its fees from selling wine or from new subscriptions. The Investment Manager needs some fairly robust rules in place for what is sold to pay fees. Fundamentally a long fund strategy with NAV valuations is flawed.

    Funds whose only business is the fund management fees, worry me the most, the income of the managers is solely based on the fees they achieve, which is directly correlated to inflated NAV's.

    I really hope the Indexes and valuation companies take a long hard look at the method for valuing long strategy funds who charge management and performance fees. If I was an investor looking to sue someone for any losses I made, I would conjoin the valuer to the action.

  2. Giles. Redemptions can be made every month but not sure how long the waiting period is:

    'It is easily accessible and units may be subscribed or redeemed each month on the basis of the monthly net asset value. In some cases, subject to the agreement of the fund manager, redemptions may even be made in kind with wine. Nobles Crus is a unique opportunity to enjoy access, at merchant
    prices, to a wine cellar housing outstanding, rare crus that are unlikely to be found on the more traditional markets.'

    I fancy some of their older wines would take a while to sell – 410 bottles of Margaux 1900?

  3. Is that a quote from their website, PPM or PR?

  4. I should have probably disclosed this before in the interests of transparency and declaring an interest in what I am commenting on. I am a licensed fund manager and manage a property and wine fund. Our property is down about 40% and wine fund is up. The comments I am making are based on my experience. We do not accept subscriptions from the general public and our funds are subject to certain limitations, including but not limited advertising and promotions. That is why I have not named them.