Personal Finance

More than just a tippler’s treasure

Arvind Jayaram | Updated on January 24, 2018

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Whisky makes for a compelling investment amid a shortage in the market



Investing in whisky is making inroads in India. Many are making a beeline for whisky assets, given the vast shortage of whisky in the market. Some estiamte that consumption will outstrip production two-to-one. It takes years to produce whisky, especially good whisky. However, distillers have been short-sighted in predicting the massive spike in whisky drinking. So what’s left is the stock that was put into barrels a decade ago, just coming to maturity now. And that’s not enough to meet today’s demand.

Evaporating stock

That’s particularly true of the better stuff. The Top 100 single-malt whiskies have appreciated over 440 per cent in the last six years and the Top 10 whiskies are up over 660 per cent during the same period, according to the Whisky Highland Index, a gauge of the performance of top-of-the-shelf whiskies. With the Top 200 whiskies also appreciating by 320 per cent over the same timeframe, whisky has significantly outperformed the fine art market, which saw investments appreciate by 39.6 per cent in the corresponding period, according to the Mei Moses Art Index. It also piped the 42.3 per cent rise in gold, as per the Kitco Gold Index.

Compounding the fears, a whole lot of whisky is lost to evaporation (the proverbial “angel’s share”) in the course of ageing. Distillers are aware of this and that’s the reason why aged whisky costs more. Longer the ageing process, more the whisky lost. Increasing demand for whisky, especially premium whisky, is enough reason for distillers and whisky drinkers alike to panic.

The most expensive bottle of whisky ever sold at an auction was a Macallan — for $6,30,000 recently. But how do you get your hands on such a venerable vintage?

Specialised firms such as The Whisky Corporation help high net worth individuals procure whisky from various distillers. According to the Hong Kong-based corporation’s Portfolio Director, David Slee, consistent year-over-year performance by whisky investments, when most other asset classes have been volatile, has made the market highly sought after by both large and small investors.

“There has been a tremendous increase in investment from Indian nationals, especially over the last year. We currently have a very substantial client base in India and this has been growing steadily. In fact, in comparison to the US and China, India has seen the most significant growth over the last 18 months,” says Slee, while declining to share specific numbers.

You can start with $10,000

So how much can a high net worth individual invest?

A starting figure of $10,000 can help put together a very strong and diversified portfolio which can deliver substantial gains, according to Slee.

“However, for someone who may not be able to invest such a huge amount, about $10,000 can also be a good starting point,” he adds. While there is no annual fee charged, investors need to pay for the storage costs.

“Limited-edition or rare whiskies, that is, produced from a single cask, will fetch anywhere between $2,000 and $5,000 a bottle,” says Slee. “For casks, which tend to deliver higher returns, the cost can vary from £60,000 to £80,000 per cask. The age of the whisky, the type of cask, and the distillery, impact prices.”

Sale prospects

 As with any investment, timing your sale and purchase is critical. For high-end whisky, the secondary market is very liquid. The sale can be made either through the auction or private route.

“Generally a holding period of two-five years is good,” says Slee.

But given the growing demand and depleting stock, the longer you hold, the more valuable your investment gets. Casks are normally held for a longer period as whisky ages in casks, not in bottles, as wine does, adds Slee.

“A good 35-year-old whisky is very hard to come by,” he says.

Published on March 01, 2015

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