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27.08.20

How to invest in Whisky

How to Get Started Investing in Scotch Whisky

Scotch whisky has many fine qualities that make it so popular with connoisseurs around the world, but assembling a collection of your favourite whiskies is one thing, but have you ever considered actually investing in them? As an alternative form of investments, alcohol is an ever-growing market thanks to the popularity of wines, with whiskies not far behind. But how do you get started?

They don’t call whisky liquid gold for no reason and while you maybe wouldn’t see a wee dram stored in a vault at Fort Knox, it can be worth millions at the right time. Auctions around the world have sold Scotch whisky at incredible sums, like the two 1926 Macallan special editions that went for £2m in 2018.

With wealthy investors from the Far East increasingly keen on buying the rarest and most prized Scotch whiskies, the market is exploding and experts are saying that the right collectable whiskies could be a better long-term bet than gold, wine or classic cars. And the numbers back that up, with the value of rare whisky up 40% in 2018, ahead of coins (12%), wine and art (both 9%) watches (5%), cars (2%) furniture (1%) and jewellery (-5%).

According to the Knight Frank index, rare whisky values have grown 582% over the last ten years. There’s even an index specially created for tracking whisky values by a consultancy called Rare Whisky 101 and their Rare Whisky Icon 100 Index has shown increases of 208% in value in the seven-year period they’re been tracking them.

Andy Simpson, co-founder of Rare Whisky 101, said: “The key to rare whisky’s sustained growth as an asset class is the passion buyers worldwide share for investing, collecting and occasionally drinking some of the best and rarest Scotch whisky ever made.”

How to Get Started

The first thing is to know what you’re looking for. Nicholas Pollacchi, CEO at the New York City–based whisky consultancy Whisky Dog says there are three fundamentals: rarity, because limited supplies mean the value will only go up; collectability because you need to buy the brands that collectors want, like Macallan, Highland Park, Brora, Balvenie, Dalmore and Ardbeg; and range, because if you have invested in a whole range of special editions from a distillery, that makes it hugely more valuable.

Next, you need to know how to actually get started. There are physical auctions you can attend from auction houses like Bonhams, who have four dedicated whisky auction dates in their annual calendar. You can also try online auctions, which can actually be more cost effective, not just because of the lack of travel expenses, but also because while you might pay up to 25% of the value of the whisky in charges at a physical auction, it might be as low as 10% online.

Other Ways to Invest – Consider Casks

Another option is to consider buying whisky casks as opposed to bottles giving you the advantage of knowing that your whisky is increasing in value as it matures over time.

As a less intimidating starting point for a new investor, Whisky Investment Partners allows you to buy and store the spirit with minimum risk and maximum profitability. Not only is your whisky safe as it is stored in barrels in bonded warehouses, it’s also tax free.

Things to Watch Out For

Of course, as with any kind of investment, there are risks involved in investing in Scotch whisky. One of the biggest is the amount of fake whiskies out there, sometimes being sold for high prices. A Chinese investor hit the headlines after persuading a Swiss hotel owner to open a 140-year-old Macallan single malt worth £265,000, and serve him a dram costing £7,810, which then turned out to be a blended whisky that was only 45 years old.

Even genuine whiskies can turn out to be less valuable than expected, particularly new releases. Macallan Genesis whisky was created in 2018 to launch a new distillery and 360 bottles were released with investors and collectors camping overnight to get their hands on them at £495 a bottle. The value of these quickly shot up to £5,000 only to fall to £1,500 in the following months.

The average fall of the worst performing whiskies can be in the region of 9%, but if you are unlucky or unwise you can end up with a bottle that falls much further than that. This is why research and steady nerves are as essential in the world of Scotch whisky as they are in any other type of investment. This is also the reason why many savvy investors are investing in whisky casks and turning to companies like Whisky Investment Partners who have an accredited HMRC license.

Interested in investing in whisky casks? Call us and talk to a member of our team today.