Investing in Whisky

Over the years, Scotch single malt has developed into an interesting product for investments. Ever since the 1990’s, there has been an increasing demand for single malt whisky, not just in Europe, but especially in Japan, Russia and China.

Recent developments show that a number of distilleries have failed to capitalize on this, causing stock shortage. Due to the long aging process – sometimes up to 10 years or longer – it is getting more and more difficult to meet the ever increasing demand for single malt whiskies.

Many whisky brokers and collectors are therefore focussing on investing in whiskies that are 20 years and older. Why? The accretion is minimal and the demand for it rises to unprecedented heights; there is simply not enough ‘old’ whisky available.

Besides that, whisky is far easier to store than wine and it lasts much longer too!

But how to invest in liquid gold?

Investment Performance

In the bar chart you see below, the investment performance of several well-known indices is compared to the APEX 1000 in the period 2015-2018. The APEX 1000 by Rare Whisky 101 is the broadest measurement of the rare whisky market which tracks the best performing 1,000 bottles of rare whisky. This index is dynamic, meaning that the bottles included can change based on performance metrics.

Rare whisky performs well in a volatile economy (via RareWhisky101)

Those are some great and interesting numbers! But what to look out for?

The search is on!

Reputation for quality, scarcity and exclusivity are very important when it comes to single malt whisky. Many leading distillers produce special limited editions of their very finest whisky, which become collectors’ items.

The bottles you should watch for fall into four categories: official bottles from popular distilleries, the recently awarded whiskies, the discontinued bottles, or the ones that are not discontinued yet but will become harder to find soon.

Big brand names are also a reliable place to invest: Macallan, Bowmore and Highland Park for example. As a general rule, Scotch is always safe – however, do not discount Japanese whisky – two big names to look out for are Nikka and Suntory.

Unlike Scotch and Japanese whisky, American whiskey has only recently established itself as a collector’s item. As such, it’s not uncommon for the price of a rare bottle of bourbon or rye to surge by a factor of 10 in just a few years. To name one example: Pappy van Winkle 23-years old has increased in value by 972.5% since 2010.

Bonhams
Danny McIlwraith from Bonhams with the world’s rarest and most valuable whisky, The Macallan Valerio Adami after it was sold for $1.1 million at the Bonhams Whisky Sale at their Edinburgh auction house on October 3rd 2018. Only 24 bottles are released.

There is however a lot of whisky maturing in Scotland right now, around 20 million casks, so it is safe to assume that the amount of whisky being bottled will likely increase in the future. This increase in supply can be a disadvantage for investors and collectors over time. It can also be an opportunity if you know your whisky…

The cost of whisky investing

Before you start you own collection, consider the costs. The initial costs can be low depending on how many bottles you want to buy and their price. Do remember that very rare bottles can costs hundreds or even ten thousands of Euros. According to some experts, the trick is to identify fair priced limited edition bottles that are likely to rise in price once sold out (like the first 100 bottles of Teeling Single Pot Still). It is also wise to search for numbered bottles and choose a bottle with the lowest number.

Schermafbeelding 2018-10-28 om 12.41.35

Buying or selling rare whiskies can be done via a variety of resellers, but the most common way of purchasing and selling rare whiskies is through a broker (like Rare Whisky 101 or Scotch Whisky International) or at an auction. But here you will have to pay auction fees and VAT on top of the price of the bottles you’ve bought. Another way is to purchase or sell via a specialized shop or even through online marketplaces like eBay or CataWiki (but be warned for fakes…).

You also need to keep in mind that if you do keep a substantial collection of whisky at home, you will need to insure it. Here are some other tips that will help you store your valuable collection of liquid gold:

  • A sealed bottle is perfectly happy at room temperature.
  • Store the bottles upright so the strength of the alcohol doesn’t corrode cork stopper and keep out of direct sunlight.
  • The value can drop dramatically if there is damage to the bottle or labelling or if the fill level drops, showing poor closing and evaporation.

Other ways of investing

It’s pretty clear that the luxury-whisky industry is in the midst of a boom. As a result, a fund that trades in luxury whisky makes sense. Launched by Swedish whisky enthusiast, Christian Svantesson, the Single Malt Fund, gives investors the chance to buy a small part of a bigger collection of rare and limited-edition whiskies. The fund is listed on the Nordic Growth Market (NGM-NDX) in Stockholm, Sweden.

The fund will have an active investment strategy of buying and selling limited rare whisky. Sales will be managed through The Single Malt Fund’s website where the fund’s investors will be offered the opportunity to purchase rare, selected whisky directly from the fund prior to it being placed on the open market.

The fund expects to raise €25 million ahead of its launch, with the invested whiskies to be selected by five portfolio managers. Bottles acquired for the fund can then be purchased from the fund’s online inventory, if desired.

It’s scheduled to liquidate after six years, and is targeting a return rate of 10% per annum.

One thing though; the Single Malt Fund is exclusively open to Swedish investors. Unfortunately…

And please do remember: with investing, you can win some and you can loose some!

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