Rare whisky cask investment is gaining traction as a serious investment asset class, like en primeur wine or off plan property.
Maybe we all need a stiff drink, but the last six months has seen whisky burgeoning as a serious investment class, with funds and indices launching in its wake. Headlines were made last year when a bottle of Single Malt Macallan 1926 sold for a record £1.5 million, demonstrating the value afforded by some investors to the alternative asset.
According to Knight Frank's 2019 Luxury Investment Index, rare whisky has outperformed other luxury assets. Between 2009 and 2019, the value of rare whiskys increased by 564 percent, placing it as the number one passion investment above coins, cars, art, wine, watches and diamonds in the same timeframe. By 2019, Scotch whisky's total export value reached £4.9 billion according to HMRC export data. With COVID-19 now, investors are looking to hedge against inflation and the uncertainties of the financial markets.
Whisky cask investment or 'whisky futures' is gaining popularity as a better way to an asset-backed return. Rather like en primeur wine or off-plan residential, you are buying the cask as an investment for the bottling, which takes place between 5-20 years later, at which point you exit the investment.
According to Global Single Malt Whisky Market Research, whisky demand is projected to rise by 4.1 percent annually.
Experts say the key things driving the market are rarity and changing tastes – for instance as distilleries get bought or mount international campaigns in the intervening years, your whisky is more popular when it is bottled, than it was when it was put into cask. Similarly, if the distillery goes bust or cuts production, your whisky is instantly rarer. As far as whisky bottled in 2020 goes, with the COVID-19 lockdown in the UK, none of the distilleries will have been producing in any great quantities for the past several months, so 2020 will become a very rare year in the market and be more valuable.
Meanwhile, in terms of the bigger picture, whisky is becoming more popular in China and Asia so demand is growing. On 7th July auction house Sotheby's Hong Kong is holding a landmark auction titled 'The Finest and Rarest Wines and Spirits'. Whisky lots include The Macallan 60-Year-old in Lalique, 6 Pillars (est. HK$600,000 – 900,000), The Macallan Exceptional Single Cask 2018/ASB–1683/13 1950 (est. HK$550,000 – 850,000), and Bowmore Black, The Last Cask, 50-Year-Old 1964 (est. HK$350,000 – 500,000). Alongside these, a fine collection of the famed Chinese spirit Kweichow Moutai from as far back as the eighties are also on offer.
Adam Bilbey, Head of Sotheby’s Wine, Asia, commented: “This season’s Finest & Rarest Wines and Spirits brings a plethora of much sought-after Scotch and Japanese whiskies, as well as Kweichow Moutai, with a diverse offering catering to all tastes and budgets.”
How To Invest In A Whisky Cask
This week saw the launch of Rare Single Malts, a Hong Kong-based private equity whisky fund giving access to mature and rare single malt Scotch whisky casks between 15 and 40 years old with a view to holding and realising growth through market appreciation, maturity and bottling.
“Faced with extreme market volatility and a prolonged global recession, investors are turning to alternative assets such as whisky to weather the storm,” said Murray Holdgate, a General Partner at the Fund. “The whisky market has now reached maturity, with an abundance of collectors, investors and specialist auctioneers creating a highly liquid environment in which to trade.”
Rare Single Malts is being launched with a target commitment of £20 million and a minimum subscription of £100,000. Initial fundraising will focus on high net worth individuals, family offices and boutique institutional investors with the first close due 31 July 2020. Henderson Fiduciary & Corporate Services has been appointed as the licensed administrator. The Fund has been launched by the partners behind Rare Finds Worldwide, a Hong Kong based whisky brokerage.
Boutique auction house Macey & Sons has started a whisky department serving the Hong Kong market. They are selling casks of rare whisky; each cask contains c.500 litres, or around 670 bottles, predominantly to HNWIs and family offices. They sold 24 casks in the first month of launch.
The casks themselves are kept in bonded warehouses in the UK, spread around a variety of locations. As time goes on, the value is constantly rerated, so there is there is a thriving secondary market as well, but they advise investors to hold for a minimum of five years.
Macey’s is working with UK consultant in the UK who is advising on which specific labels to invest into, called Colin Hampden-White.
Headquartered in Los Angeles with offices in Sydney and Hong Kong, CaskX was launched in May by former financier Jeremy Kasler. It was the first company specialising in the sale of whisky cask portfolios to investors in the United States and Australia.
All CaskX portfolios include a 10-year storage plan, which allows the whisky to mature and transform bringing flavour, colour and value to the cask. Casks aren’t released until they have reached their ultimate potential. CaskX will then help you help you resell, bottle, and distribute your cask portfolio when the whisky has come of age.
Whisky casks are stored in government bonded warehouses under the strict oversight of the Scottish government. Investors can expect complete transparency and full disclosure throughout the entire lifecycle of the investment.
Since launch, CaskX has sold around 100 casks, with a minimum investment of approximately US$20,000. The company forecasts a projected capital growth of 14.2 percent for whisky casks.