Elite Advisers’ Wine Fund Favors Burgundy Over Bordeaux

Elite Advisers SA’s wine fund, one of Europe’s largest, is boosting its holdings of Burgundy over Bordeaux and sees value in the region even after price gains.

The investment vehicle, branded Nobles Crus, has a five-year track record and had 102 million euros ($135 million) under management at the end of December. Wines held include a Romanee-Conti 1915 Domaine de la Romanee-Conti, harvested during World War I, and Chateau d’Yquem Sauternes dating back to 1811, when Napoleonic troops were fighting in Spain.

Historic Burgundies including Domaine de la Romanee-Conti, Henri Jayer and Armand Rousseau are driving prices this year, boosted by Chinese collectors focusing on the region after fueling Bordeaux gains in 2010 and 2011. While Medoc first growths fell last year amid the financial crisis in Europe and the U.S., they have rallied since November, lifting the market and encouraging buying in lesser-known labels.

“People are becoming more interested in Burgundy,” Christian Roger, Chief Executive Officer of Gruppo Vino e Finanza, the Milan-based manager for Nobles Crus, said last month. “I don’t think the prices are too high. I think there will be other domaines which will be sought.”

The fund aims to keep more than 50 percent of its holdings in Burgundy, and, when appropriate, as much as 55 percent to 60 percent. That fell to 46 percent following purchases of Bordeaux 2009 and 2010 futures, and now managers want to rebalance it.

“It’s a strategy that we’ve had since the start, and that I am continuing,” Roger said. The Luxembourg fund, set up by Elite’s founders Miriam Wilson and Michel Tamisier in late 2007, is boosting Burgundy to more than half of managed wine assets.

Burgundy Market

Auction houses and investment managers have cited demand for Burgundy in the past six months. A 1990 case from Henri Jayer’s Vosne-Romanee Cros Parantoux vineyard sold for $113,525 at Hart Davis Hart in Chicago last month. Jayer, who died in 2006, is one of Burgundy’s most sought-after wine-makers.

Wine sold at a Sotheby’s January sale in London included a case of Chambertin 1999 Armand Rousseau and 12 bottles of the more recent Chambertin Clos de Beze 2005 Armand Rousseau, which each fetched 11,163 pounds ($17,640). Six bottles of Domaine Dujac Echezeaux 1978 made HK$196,800 ($25,380) at Acker Merrall & Condit in Hong Kong the same month.

Nobles Crus aims to place 70 percent of its assets in older vintages, 20 percent in wine futures and 10 percent in cash. Wine is bought from private cellars, merchants and restaurants.

According to data from Elite Advisers, Nobles Crus returned 7.8 percent in 2012 after gains of 11 percent in 2011, 13 percent in 2010, 9.8 percent in 2009 and 20 percent in 2008.

Track Record

That compared with declines for the Bordeaux-dominated Liv-ex 100 Fine Wine Index of 8.9 percent in 2012, 15 percent in 2011 and 14 percent in 2008 and gains of 40 percent in 2010 and 16 percent in 2009.

The valuation method used by Nobles Crus was subjected to scrutiny by the Financial Times in September after the newspaper sought a Liv-ex estimate of Bordeaux wine in the collection. Elite Advisers responded by commissioning an external report and writing to investors explaining its procedures.

“On average we’re now doing basically a 12 percent return per annum,” Wilson told Bloomberg in an interview during a visit to London in January.

“We not only have the Bordeaux wines, which are the most well-known in the U.K. market. We have the Burgundy wines, we have the top wines from Italy and from Spain, and this diversification has given us the performance.”

Italian Wines

Elite Advisers had 63,000 bottles in its collection in Geneva at the end of 2012, according to Roger. Main holdings include Chateau Latour, Chateau Petrus, Chateau Ausone and Chateau Cheval Blanc in Bordeaux, Romanee-Conti DRC in Burgundy, Barolo from Italy and Vega Sicilia from Spain.

Monthly valuations are based on four prices for each wine, two from auction houses and two from European or U.K. merchants. Elite Advisers has 10 auction houses and 60 merchants from whom it draws prices, and the fund is audited by Deloitte.

“Every piece of pricing that we get is backed up, documented and controlled by our auditors at the end of each year,” Wilson said.

Burgundies held by the fund as of December 2011, the latest date for which detailed information is available, included more than 40 vintages of Romanee-Conti spanning the past century and Jayer Cros Parantoux from 13 separate years back to 1978.

Before it's here, it's on the Bloomberg Terminal.