Whisky recently topped an index for the best-performing luxury investments – but why is it so popular, and what do you need to know to invest.
Collectors of whisky – and whiskey as it’s known in Ireland and the US – are raising a glass to the news that the spirit is becoming ever more popular as an alternative investment. This was emphatically underlined last year when a single bottle of The Macallan 1926, hand-painted by Michael Dillon, was sold at auction by Christie’s for US $1.5 million (more than £1.2 million).
The price for that rare bottle of Scotch – which was then a world record – was surpassed in October, when a 60-year-old bottle of The Macallan 1926, which is from the same cask as the previous record holder, fetched US$1.9m (£1.5 million) at a Sotheby’s auction.
Rare whisky, featured for the first time in Knight Frank Luxury Investment Index, was the best-performing collectable in 2018, with values surging by 40% in that one year and by 582% over the past 10 years.
Andrew Shirley, Editor of The Knight Frank Wealth Report, which published the index figures, says: “There has long been a collectors’ market for great Scotch or fine whiskies from other parts of the world like Japan, but until relatively recently, it was driven by long-term connoisseurs.” He explains there’s been growing interest from new collectors, particularly in Asia. It’s this extra demand, combined with limited availability, which has seen the value of rare whiskies rise.
Leading collector Sukhinder Singh, who’s also the co-founder of specialist retailer The Whisky Exchange, agrees but adds: “Whisky is the most beautiful of spirits, it is the most regulated spirit in the world and most importantly is a pure product. With so many different distilleries and styles, there is something for everyone.” As people discover their love of whisky, he says, demand grows for a product that needs years to mature. This has led to shortages and the value of rarer whisky has gone up immensely.
Demand equals high value
So, what do you need to know if you’re thinking of investing in whisky? Euan Shand, owner of Aberdeenshire-based DuncanTaylor Scotch Whisky has amassed some of the world’s most sought-after vintage and rare whiskies. His top tip is to use a “respectable broker who has decades of experience” within the whisky industry.
But he adds: “Invest in a cask from a whisky distillery that has recognised growth potential. Good Scotch examples would be Macallan, Bowmore and Springbank because there are very few casks around from those distilleries, so the demand is high and people are willing to pay high values. That’s if you can secure a cask in the first place!”
He also recommends investors consider keeping casks (barrels) of whisky in a bonded warehouse. “This keeps the provenance intact and means that Her Majesty’s Revenue and Customs duty does not apply until cask removal for bottling.” Singh warns: “Like any investment, knowledge is key. Never invest in something without professional advice. Of course, there are some simple things to take note of. For example, a standard ongoing bottle of whisky will not increase in value unless it becomes withdrawn from the market.”
Limited-edition whisky and single malts from single casks, where there is a small outturn, can be good investments, he says. “Bottlings from lost distilleries are still available in some cases, others are available through specialist shops.”
Hard to predict
Shirley says time will tell how the trend for high value in rare whisky develops, although the market was flat in the first six months of 2019. He says: “What goes up can most certainly come down, especially when a market is driven by sentiment rather than economic fundamentals. “A lot of fingers were certainly burnt about 10 years ago when speculators tried to ride the Bordeaux bubble, which was being driven by a surge in demand from Chinese collectors for a small number of iconic first growth wines.
“Trends, taste and fashion also play a large additional role in these kinds of markets, which make them hard to predict. Genuine collectors will be picking up on the latest trends long before the media starts trumpeting about record-breaking sales in specific sectors. So, it pays to keep your ear to the ground and get in early before the speculators.”
He stresses that the Knight Frank Luxury Investment Index is not about providing investment advice, but adds: “Buy what you love, whether it’s a car, painting, jewellery or whisky. If the values go up, well, that’s a bonus.”
Past performance is no guide to future performance.