Talk about liquid assets.
Goldman Sachs Group Inc. accepted almost 15,000 bottles of fine wine as loan collateral from a former high-ranking executive, according to a regulatory filing last month. Andrew Cader, a former senior director at Goldman Sachs’s specialist- trading unit, pledged a secured interest in the wines, which are primarily from the Burgundy and Bordeaux regions of France, the filing showed.
Goldman Sachs’s move stands out because private banks that lend money to wealthy clients against assets such as artwork and real estate have been less willing to extend loans backed by fine wines, said four specialty lenders and attorneys. While investment-grade wines have outperformed the stock market over the past decade, the asset class has been prone to fraud, prompting billionaire William William Koch to file a series of lawsuits to deter counterfeiting.
“There are a lot of very highly valued wines here,” said David Parker, the head of Benchmark Wine Group in Napa, California, adding that the collection cited in the filing had an estimated market value in the low-seven-digit dollar range. “The Bordeaux are all first growth and other classified-growth and the Burgundies are all grand cru and top premier cru.”
The designation first growth is the top ranking in a classification for wines from Bordeaux, based on the chateau that produced the wine. Grand cru and premier cru are used to designate the top Burgundies, a system based on the vineyard in which the grapes were grown.
Wine Index
Cader declined to comment through Seth Lapidow, an attorney at Blank Rome LLP, a New York law firm that represents him.
``While we do not comment on individual loans due to client confidentiality, we take great care to apply high standards of risk management and appropriately value any form of collateral on all loans,'' said Andrea Raphael, a spokeswoman for New York- based Goldman Sachs.
With the U.S. government clamping down on proprietary trading at investment banks, firms have been building up private banking operations to help replace lost revenue. The ultra-rich clients of these banks, who hold collectibles such as art and wine, have sought to borrow against the assets after they have appreciated in value and interest rates have been stuck near record lows for more than four years.
The Liv-ex 100 Fine Wine Index, an industry benchmark that reflects the price movement on 100 of the most sought-after wines that have an established secondary market, has increased at an average annual rate of 11 percent during the past decade through April, outpacing the 7.9 percent total return for the Standard & Poor’s 500 Index.