Monday, 7 January 2013
Elite Advisers: 'general concerns as to the nature and tone of your articles'
Inside Patriarche's cellars in Beaune
On 17th December 2012 I received a 'private and confidential' email letter from Ramona Mehta of solicitors Mischon de Reya, who act for Elite Advisers, whose wine investment fund is Nobles Crus. The letter was not for publication and shouldn't be 'referred to elsewhere' – some similarities with a super-injunction?
I was asked to remove from Jim's Loire the letter that Elite Advisers had sent to their investors on 11th December 2012 on the grounds of confidentiality. This I did, although it is interesting that Elite Advisers had been happy for journalists to see previous communications to their investors. Indeed on 12th December I had a long phone conversation with the Brunswick Group, a PR company representing Elite Advisers, going through points in the letter to investors and at no time was it mentioned that what we were discussing was considered confidential. Following this discussion I posted here on Jim's Loire. Perhaps it is a question of 'nature and tone'.
Brunswick (12.12.12) stressed how transparent Elite Advisers has been with information about their Nobles Crus wine fund, so it would be good if they will now publish the data that showed that there 'were no mid-prices available for 78% of the sample on either Liv-Ex or Cellar watch'. Then it would be possible to reconcile the difference between Ernst & Young's reported findings and the data that was sent to Elite Advisers by Liv-Ex in early November 2012. As it stands, only Nobles Crus investors who visit Luxembourg can see this data once they have signed a confidentiality agreement.
My reply to Ramona Mehta:
24th
December 2012
Dear
Ramona Mehta,
Thank
you for your letter of 17th December 2012.
I
note that you have ‘general concerns as to the nature and tone of your
articles’. Although I can imagine that your clients, Elite Advisers SA, might
prefer a pliant press, I believe that my questions and articles while perhaps
searching and robust do not ‘constitute unreasonable conduct’ rather they are
fair comment.
As
requested I have removed my post of 12.12.12 - the letter to investors dated 11th
December 2012. Please note that if Elite Advisers had contacted me I would have
removed this post at their request without the need to send me a solicitor's
letter. I note, however, that there appear to have been no objections to press
quotes from the letters from Elite Advisers to investors dated 3rd and 19th
October 2012.
Your
clients, Elite Advisers, should be aware that I will not reveal my sources.
Conversation
with Brunswick (12th December 2012):
All
of the points you raise here in relation to my conversation with Brunswick on
12th December 2012 were covered in my post of 13th December 2012. I was very
grateful that Jess Ayres and Alison Dykes came back to me on 12th December 2012
with a detailed response to my questions and my post of 13th December fairly
reflected my conversation with Jess Ayres.
The
78% claim
‘There
were no mid-prices available for 78% of the sample on either Liv-Ex or Cellar
watch’
I
quoted the 78% figure in the section ‘Liv-ex data including Cellar-watch?’ and
that only 22% of the Liv-Ex mid-prices appear to match wines in the Nobles
Crus’ portfolio. As your clients would appear to have overlooked my use of the
78% figure I have now amended that section of the post.
I
note that you and your clients continue to refer to Cellar Watch data, although
they were informed explicitly by Liv-Ex on two occasions (24.10.12 and 7.11.12)
that Cellar Watch data was not suitable for valuing wine funds.
Elite
Advisers' assertion that Ernst & Young were unable to find prices for 78%
of the Nobles Crus Portfolio is not backed up by any available evidence, although
it may be available to investors prepared to travel to Luxembourg and who are
willing to sign a confidentiality agreement.
In
contrast I do have a copy of the mid-price data that Liv-ex sent to Elite
Advisers to assist in the valuation of their wine fund. This data covered 275
different wines in the portfolio and covered 50% of the wines in the Nobles
Crus fund. Without knowing how Ernst & Young concluded that they only had
Liv-ex data to cover 22% of the fund, it is impossible to reconcile the claim
made by Elite Advisers and the data supplied by Liv-ex.
Ernst
& Young not an 'audit'.
I
did not suggest that it was.
The
terms of the payment for Laurent Vialette are a matter between our client and
Mr Vialette.
Although
I was pleased to learn from Jess Ayres that Laurent Vialette is properly
remunerated, the Wine Experts Ltd accounts for 14th October 2010 - 31st
December 2011 do not reflect this as the company's turnover for this period was
755€. Elite Advisers’ Les comptes annuels au 31 décembre 2011 states that the
‘Independent valuer for the sub-fund: Elite’s Exclusive Collection – Nobles
Crus is Wine Experts Ltd, Dublin.
‘Laurent Vialette, the internationally
renowned, independent wine valuer is contracted via the independent company
Wine Expert (sic) Limited’, This arrangement was confirmed by Jess Ayres of the
well-regarded Brunswick Group told me during our discussion that
Jess
Ayres also informed me that Vialette is contracted through Wine Experts Ltd,
although Ayres informed me that he did not understand how the arrangement with
Wine Experts Ltd works. As the terms of the payment for Laurent Vialette are a
matter between your client and Mr Vialette, I would be most grateful if you
would ask Elite Advisers why the monthly payments to Mr Vialette do not figure
in the accounts for Wine Experts Ltd.
James
Miles and the claim that ‘mid-prices are not available for 78% of the Ernest
& Young sample'.
No
evidence has been provided by Elite Advisers to back this claim. In contrast
James Miles' company - Liv-ex - provided data for 275 different wines in the
Nobles Crus portfolio. This data covered 50% of the portfolio as of 31st August
2012.
Unanswered
questions by Elite Advisers
While
I am grateful to Brunswick for replying in detail to my questions of 12th
December, there remain a number of questions that I have put to Elite Advisers
that remain unanswered, in particular in relation to the provenance of some of
the older wines in the Nobles Crus portfolio and to the role of Wine Experts
Ltd. These topics were highlighted in my post of 13.12.12. In addition I'm
awaiting information that Brunswick undertook to get for me during our
conversation in relation to the level of due diligence carried out by Deloitte
during their annual audit in respect to the provenance and condition of the
older vintages in the fund, which are stored in Switzerland.
‘Ernst
& Young Report: open only to investors who visit Luxembourg and who sign a
confidentiality/non-disclosure agreement.’
I
made this clear in my post of 13th December 2012.
'paperJam
article (22.10.12) 'number of inaccuracies'
Please
note that my post of 13th December quoted this observation as made to me by
Jess Ayres. I’m intrigued to know what these inaccuracies might be apart from
referring to the Ernst & Young as a second ‘audit’ and that the report from
Ernst & Young would be published in the week of the article from paperJam.
Given that the article reported that ‘Elite Advisers l’attend avec impatience’
it is reasonable to assume that the source for this was someone close to Elite
Advisers unless this was invented by paperJam. All of the figures quoted in the
article came from the letter of 19th October 2012 sent to investors by Elite
Advisers.
I
would be most grateful if your client would indicate what these 'inaccuracies'
are in the paperJam article (22.10.12).
‘As
our client has stated, where it has sold wine in more normal market conditions
it has achieved prices at above its published valuation levels.’
I
covered this in my discussion with Jess Ayres on redemptions in the post. I have now
added details of the wines sold by Elite Advisers during 2011, which I had previously
included in a post of 11th October 2012. It is still the case that the only
time that redemptions exceeded 10% was in March 2009 and that it is not known
whether the Nobles Crus valuations would be achieved if Elite Advisers had to
sell a significant quantity of wine.
Yours
faithfully,
Jim
Budd
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