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2012: International Wine Challenge – Personality of the Year Award

Friday, 2 November 2012

Nobles Crus: a question of provenance and the bargain 'independent valuer'

Château Lafite-Rothschild

The Nobles Crus wine fund has an impressive list of old vintages from many of the most distinguished estates in Bordeaux and Burgundy including Pétrus and Domaine de la Romanee-Conti.

There are large format bottles of Pétrus including a 1947 magnum, double magnums and jeroboams from the 1959 and 1961 vintage. From DRC there is an even more mouth-watering range.  Romanée-Conti starts with the 1875 followed by 1915, 1919, 1929, 1934, 1942, 1945 – bottle and magnum, 1953, 1955, 1959 ­– bottle and magnum, 1960 and 1962.  Then from La Tâche, Nobles Crus list the 1938, 1942, 1943, 1945 and 1947.  

Nobles Crus wine fund is unusual in including a significant number of older wines in their portfolio. In contrast the Wine Investment Fund has nothing earlier than 1990, while WAM (Wine Asset Managers) has only 5%-6% of its pre-1990 and then only back to 1982.

Clearly being different can be advantageous but these days where provenance is so important, following the arrest in March 2012 and the subsequent charging of Rudy Kurniawan with counterfeiting as well as the several legal cases brought by Bill Koch, it can bring complications. 

This is likely to make these wines more difficult to sell than recent vintages of Latour or Lafite, for example. It is also likely to take more time because of the need to satisfy potential buyers or auction houses that the wine’s provenance is impeccable. Buyers are mindful of Laurent Ponsot’s (Domaine Ponsot: claim that ‘80% of pre-1980 Burgundy being sold at auction today is fake’ ( 14th March 2012).   

Regarding provenance Miriam Mascherin, one of the managing partners of Elite Advisers says: “Christian Roger our fund manager only buys the best wines in their best vintages in perfect condition. We never buy bottles that have been conditioned other than in the domaine directly.  At purchase we do take into account the neck levels as well as a series of other criteria in order to buy only those wines that meet our high level of quality.

“We only buy wine where sources can be proven and blind testing can be carried out.  Any wine that has already been counterfeited is handled with the utmost caution and we would only buy from recognized approved sources.”

It is not surprising that establishing the provenance of old bottles is difficult unless the wine has been sourced directly from the property. Even then it can difficult as records may have been lost, the property changed hands and the people who made and managed the estates at the time are now long since dead.

Take the large format bottles of Pétrus from 1959 and 1961. Christian Moueix, president of Établissements Jean-Pierre Moueix and owners since 1964 of Pétrus is unable to confirm or deny whether there was any Pétrus 1959 or 1961 bottled in large format. 1961 was a particularly small vintage due to spring frost, although of very high quality. Equally Domaine de la Romanée-Conti is unable to confirm or deny whether the estate bottled any of its 1945 in magnum:

An email from DRC (5th October 2012) explains:
‘Nous savons que des magnums de Romanée-Conti 1945 existent sur le marché. On nous a demandé à plusieurs reprises de les authentifier. Il nous impossible de le faire, car n’avons aucune trace des ces magnums dans nos archives que ce soit lors de la mise en bouteilles de ce millesime, ou ultérieurement, comme le voudrait une rumeur selon laquelle, a la demande d’une personalité politique importante, le Domaine aurait fait des magnums avec des bouteilles… Les personnes qui auraient pu porter réponse à cette rumeur sont aujourd’hui décédées. Il nous donc impossible d’authentifier ces magnums.’  
Whether DRC could authenticate the other old vintages in the Nobles Crus fund may well be a moot point. This is not to say that these wines are fakes – it just illustrates the difficulty of establishing the provenance of old vintages. This uncertainty also makes it difficult to establish a robust and realistic valuation for these wines, which is further compounded by their rarity. For instance, wine-searcher has no data for double magnums of Pétrus 1959 over the last four years.

wine-searcher – 1959 Petrus double magnum: 'No results for the 1959 vintage' 

Deloitte, the auditors for Elite Advisers owners of the Nobles Crus fund, may have been mindful of this when they added an Emphasis of Matter to their auditor’s report of 2009 for the period 2007-2008 and in the two subsequent years – auditors' report of 2010 and 2011:

In our opinion, the financial statements give a true and fair view of the financial position of ELITE’S EXCLUSIVE COLLECTION and of each of its sub-funds as of December 31, 2008 and of the results of their operation and changes in their net assets for the period from November 19, 2007 (date of incorporation) to December 31, 2008 in accordance with the Luxembourg legal and regulatory requirements relating to the preparation of financial statements.

Emphasis of Matter
Without qualifying our opinion, we draw your attention to note 2 of the financial statements. The sub-fund ELITE’S EXCLUSIVE COLLECTION – NOBLES CRUS includes wine assets valued at EUR 10,973,119 (100.8% of the net assets) as at December 31, 2008, whose fair values have been estimated by the General Partner in the absence of readily determinable fair values. The General Partner estimates are based on information provided by a limited number of wine merchants and other sources of information, which are in accordance with note 2 of the financial statements.'

Wine Experts Ltd: independent valuer for the sub-fund: Nobles Crus

In the Rapport annuel << Elite’s Exclusive Collection >> 2012 pour l’exercise 2011, Wine Experts Ltd is listed as ‘an Independent valuer for the sub-fund – Elite’s exclusive collection – Nobles Crus’. Wine Experts Ltd was founded on 14th October 2010 and its registered office is at 7th Floor, Hume House, Ballsbridge, Dublin 4, Ireland. Its two directors are Carmel Heverin and Ellis Treacy. The company secretary is Corplaw Ltd. Heverin is a director of 52 companies including Wine Experts Ltd, while Treacy is a director of 55 companies including Corplaw Ltd. Apart from the two directors the company has no employees.

The company's email is The Dublin offices of the Pearse Trust Ltd are 7th Floor, Hume House, Ballsbridge, Dublin 4. Their website states that the 'Pearse Trust Ltd is an independent advisor on corporate and trust structures.  Our service is distinguished by expertise, transparency and value. Our service excellence allows us to build lasting partnerships with our clients, some of whom have been with us for over 20 years.'
According to the accounts published for the period 14th October 2010 to 31st December 2011 the company’s ‘principal activity during the period was that of an agent in the field of manufacturing wine’. Its turnover was 755€. The administrative expenses were 3,392€ and the company made a loss of 2,637€.

It is not clear what expertise Heverin and Treacy have in providing valuations for fine wine nor to role they play in providing ‘independent’ valuations for the Nobles Crus wine fund. I have asked this of Miriam Mascherin but have not so far had a response. Equally I’m awaiting a response to my question asking whether they have a full provenance trail for the old vintages from DRC and from Pétrus. 

Following the appointment of Wine Experts Ltd as the 'independent valuer', Deloitte have dropped their 'Emphasis of Matter' from the 2012 report. Presumably Deloitte considered that Elite Advisers were getting really remarkable value from Wine Experts Ltd: an independent valuation of the Nobles Crus wine fund that stood at 67,200,503€ as of 31st December 2011 for a maximum of 755€. 

Michel Tamisier, managing partner of Elite Advisers, doubtless considers this a bargain, too. In an article (2nd October 2012) for paperJam, a business magazine and website based in Luxembourg, Tamisier said of the audit of the funds carried out by Deloitte Luxembourg: "Les auditeurs n'ont émis aucune réserve. Les rapports sont nickels. Il n'y a absolument aucun sourci là-dessus."    

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