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Delhi Wine Club
Another Wine Fund Goes Bankrupt

Posted: Thursday, 19 April 2012 15:17

Another Wine Fund Goes Bankrupt

Apr 19 : During the same week as Bloomberg broke the story about bankers leaving their jobs to start £50 million wine investment fund-The Wine Trust, came a story in Decanter that yet another UK-based fund Beaumont Vintners had gone bankrupt, with the Paris-based expat Indian owner of a wine fund giving tips on how to avoid falling into the honey trap.

Beaumont Vintners customers placed orders for £600,000 -700,000 for the much coveted 2009 Bordeaux en primeur. The company, however, only ordered and paid for £30,000-£40,000 of wine. There seems to be a deficiency of £1.5m according to

The directorship of the company is opaque:  aguy named Samuel Philips was the sole director, appointed in November last year on the resignation of Stephen Carpenter, who remained a signatory. Another director, Richard Evans, resigned in February 2011.

Philips was a nominal or benami  (front man) director as he was not a signatory to the company bank account. During the creditors’ meeting on 5 April, Philips reportedly declined to name those who actually ran the company, which was set up in June 2010.

Another company Bordeaux UK which sold wine investments through cold calls and was founded in 2002, went under liquidation in November last year. There are as yet no definite figures for the deficiency but creditors are likely to get 30p for the British pound.

Another report in Business Standard courtesy Bloomberg News talks of 38-year young Brian Mota  giving up the familiar turf of private equity for wine investing. He had been evaluating more conventional investment opportunities in Greenwich, Connecticut, after leaving JPMorgan Chase & Co’s investment-banking unit. Treating wine in a similar fashion, he has hooked up with former investment banker and an avid wine collector Timothy Clew with whom he formed The Wine Trust in 2010.

TWT is in the process of raising as much as $50 million for the trust, the only private-equity structured wine-investment fund in the US with a targeted amount of more than $20 million.

“This was an opportunity to take Wall Street-type disciplines and apply them to an asset class that was largely devoid of that type of thinking,” Clew said. The fund buys both physical wine and futures (en primeur) directly from negociants to lock-in lower prices and secure significant quantities for investment of the most sought-after producers. It seeks wines with strong appreciation prospects after release, including first-growth Bordeaux.

DelWine has always taken a neutral advisory position in the matter of wine investments to several enquiries received regularly, as it depends a lot on the risk profile of the investor. But it has always advised a cautionary approach of jumping in only if there is some extra money that the subscriber is willing to risk losing. Other day a restaurant manager was very excited when he told me a good friend of his had told him to invite all his savings with him for wine investments and expect a good annual return of around 24%. At the very worst scenario, he could drink the wine he had purchased. A quirky logic indeed- as if this guy can afford drinking such expensive wines-and not to mention the fact that when you invest in a fund, wine is not in your hands but in the hands of a Beaumont Vintners or hopefully a good performer in the long run, The Wine Trust, if you are lucky.  Wine loving connoisseurs may release a small change from their million-dollar cash assets for the hobby or addiction, if they have the gambling instinct.

The Liv-ex Fine Wine 100 index, the industry benchmark, has produced a return of 195 per cent during the past seven years. The index, calculated monthly, represents price movement of 100 of the most sought-after wines. “Returns from wine investment have consistently outperformed other asset classes,” said Miles Davis, a partner at London-based Wine Asset Managers LLP which with about $25 million under management from two funds, has returned about 10 per cent during the past five years. But the past performance is neither an indication nor a guarantee for future appreciations. Besides, in India 10% return is not attractive, especially for the risks involved in the investment.

Before you invest, it might be worth taking tips from the Paris-based Indian expat, Meenu Kohli who started Winetage Investment Fund in 2009 and is clocking 150% appreciation so far, for the first tranche investors and 30% for those who invested a year later. She says that investors must ensure 5 things before they trust their money with an investment Fund – Strategy, Team, Regulation, Economics and Access to reliable suppliers.

1. Strategy - What is the Strategy of the Fund-(which includes by when and  in what duration and how much amount, what percentage of money collected are they are going to invest  ...usually this is specified in the Private Placement Memorandum (PPM)- if they have any.

2. Team- Who are the team members and what reputation risk do they carry along with the monetary risk?

3. Regulation/Governance – How regulated is the Fund and what are the consequences if the Investment Managers indulge in any fraudulent activities. More regulated funds like Winetage cost a lot but protect the investors. Auditors and administrators are very important and regular reporting should be done by the administrators directly to the investors. Whether the valuation is done by the neutral third party like London –based Liv-ex and whether the wines are stored with the Custodian are also very important factors

4. Economics – Whether the investment manager has his or her own skin in the game – are they investing anything or totally playing with others’ money?

5. Access to reliable suppliers is very important as sometimes the wines are bought but are not delivered by some suppliers.

She signs off by warning that investors should always read the offer document in detail as it has all the points and it’s a binding contract.

Victims of Beaumont Vintners would certainly discover that the merchants did not meet all the above criteria and hopefully The Wine Trust has done the homework well enough so that it does not find a similar  article written about them by Jim Budd for Decanter in a couple of years. Prima Facie, Winetage seems to have done their homework well.

Subhash Arora


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