The nature of investments is that you are taking a risk in order to receive a reward, but 2020 has brought a lot more risk and uncertainty because of the chaos the Covid-19 pandemic has wrought upon the global financial markets. Investors who made the wrong calls at the wrong times have lost big, while many others have fled to safer ground with investments in traditionally stable markets.
Gold has been one of the most popular safe investments, rising to an all-time high in August of $2,072 per ounce, though it has since waned to $1,885. Bitcoin meanwhile has also had a great year, jumping above $17,000 to a three-year high in November, having been down as low as $4,000 as the pandemic first took hold globally in March.
Covid-19 seems to have convinced investors to take another look at cryptocurrencies after recent uncertainties in those markets, and Ethereum, Litecoin and XRP have all seen their value soar. “The virus crisis is propagating the reassessment of bitcoin,” said Nikolaos Panigirtzoglou, an analyst at JPMorgan. “There is a reassessment about its value here as an alternative currency; as an alternative to gold.”
But there are other alternatives to gold out there. Bitcoin may be finding its way into the mainstream and its scarcity (capped as it is at 21m) is what has helped it keep its value during this pandemic, but it remains a mystery to many investors. Much more familiar is investing in something tangible, which is why alternative investments are becoming so popular this year.
Investments in whisky have been growing for many years. Earlier in the year, rare whisky topped the Knight Frank luxury investments index, having risen by 564% in value over the last decade, putting it well ahead of classic cars, which rose in value by 194% in the same time, while fine art rose by 141% and wine by 120%.
Meanwhile, whisky casks have become ever more popular as investments this year, despite the impact of Covid-19. According to Adrian Mason, Managing Director of Whisky Investment Partners, “we’ve seen huge demand globally from clients looking for safe investment options this year, due to the uncertainty that the pandemic has caused. Lockdowns across Scotland causing significant reductions in output has made 2020 casks even rarer for the future. There has never been a better time to get involved in this established market.”
The BC20 Whisky Cask Index has claimed that if you had invested $100,000 in whisky casks in July 2018, they would have been worth almost $160,000 by the end of June 2020, an impressive rise that puts whisky casks ahead of both gold and Bitcoin for growth. Meanwhile, returns from investment have outstripped Bitcoin, gold and also the S&P 500.
The report showed that of all the distilleries you can buy casks from, Laphroaig comes out on top with an average of 19.88% projected annual capital growth, followed by Bunnahabhain and Staoisha. However, even bottom-of-the-table Ardmore showed a growth of 5.13% per year, with none of them projected to make losses for investors. So it’s no wonder cask investments are seen as a safer investment than most other options.
Cask whisky investment has become ever more popular since the 2008 global financial crisis, before which investment normally took the form of building up collections of rare individual bottles. That crisis led investors to look for safe options, just as this current pandemic and economic slowdown is doing right now, which is why cask whisky is rising in popularity once again.
Investing in casks means either buying newly-produced spirits directly from distilleries and letting them mature, or getting pre-aged casks from other investors and brokers. It’s a way of ensuring the value will go up because your whisky is maturing all the time, while each cask is also unique. Your casks are stored for you in fully-insured government bonded warehouses meaning they’re safe and secure while they mature.
You can invest in whisky casks through physical auctions at houses like Bonhams, where there are four dedicated whisky auction dates each year. You can also try online auctions, which have the added benefit of usually being cheaper because fees can be as little as 10% of the value of the casks, when they can be up to 25% at a physical auction.