Whisky has posted some intoxicating returns in recent years and opportunities exist at every level. Read on for a taster of what would-be whisky investors should know.
November 2023 will have seen the London auction of a bottle of whisky hailed as the ‘holy grail’ of the grain spirit: a Macallan Adami 1926, which is expected to fetch at least its Sotheby’s guide price of £1.2m – if not more, and potentially beating the current record held by a bottle of The Macallan 1926, which fetched £1.5m in 2019.
The Macallan Adami 1926 is extra special due to replaced corks and labels, this particular bottle featuring a design by Italian painter Valerio Adami. Another featured artist is Sir Peter Blake, who is famed for the cover of The Beetles’ ‘Sgt. Pepper’s Lonely Hearts Club Band’ album.
Japanese buyers are known to have bought several of the 40 bottles of Macallan 1926 made, and one was famously drunk at a celebration there (only 16 are thought to be Adami editions). However, that is the only publicly known instance of the precious Macallan 1926 liquid actually being consumed – unsurprisingly considering that a just a taster would be worth around £40,000.
More accessible options
Obviously, such bottles are the preserve of the ultra-wealthy enthusiast, but investment-grade whisky has proven to be one of the best performing passion assets in recent years, showing itself capable of rising over 500% overall in a decade1. So, what investment opportunities can be found at the more realistic end?
It pays to know that many household name manufacturers like Diageo and William Grant & Sons have luxury business lines dedicated to secret bottlings and rare editions across their whole portfolio. The leaders in the whisky sector, many of which are naturally Scottish, will often have a whole private client business. These houses manage their relationships with loyal customers like wealth management institutions run their relationships with HNWIs; a white-glove experience can be expected, including lots of exclusive events (and tastings) if desired too. More importantly, whisky specialists will be able to advise on import and sales taxes, auction houses, storage, security and more.
Obviously, such bottles are the preserve of the ultra-wealthy enthusiast, but investment-grade whisky has proven to be one of the best performing passion assets in recent years, showing itself capable of rising over 500% overall in a decade
The Macallan Adami illustrates how partnerships with famous figures can hugely boost value, but so too can brand partnerships of a more unusual kind. Scottish distillery Bowmore has for example collaborated with Aston Martin to release extra special whiskies – some in bottles made from the iconic carmaker’s cylinders – which can fetch tens of thousands of pounds at auction after having been bought for hundreds just a few decades earlier. Whisky brands will often team up with luxury clothes brands, clubs and celebrities to create special bottles too, and these are frequently offered as ballot sale promotions to preserve their cachet.
1 According to the ‘2020 Knight Frank Wealth Report’, rare whisky rose some 564% over decade prior
Bottle, series or cask?
Although wine may be the far better known ‘liquid investment’, investors might come to consider a single bottle of exceptional whisky as the easier option in terms of storage, transportability, and transparency. And, since it is such a strongly growing area of interest among High Net Worth Individuals all around the world, very much including Asia, a whole ecosystem has sprung up to service whisky investment. As well as a growing army of expert advisers, auction specialists and boutiques, there are also whisky indices which show the direction of travel for premier examples over time, just as there are for vintage wine and other collectible assets.
As well as a growing army of expert advisers, auction specialists and boutiques, there are also whisky indices which show the direction of travel for premier examples over time, just as there are for vintage wine and other collectible assets
Serious investors can opt to buy a ‘series’ of specially developed whiskies or even a whole cask if they have very deep pockets (and an eye on legacy). These can easily run into the hundreds of thousands of pounds, although the returns on offer can be similarly punchy: casks can fetch a million pounds or more after just a few decades of maturation, if the selection is right.
There is a particular glamour to owning a really special bottle of whisky, although many would doubtlessly find the prospect of owning and never enjoying such an elixir to be torturous. It takes real discipline to own passion investments which, unlike paintings and cars, can never be enjoyed.
All such assets require secure storage and insurance, however, and that is something I always point out to any user who mentions passion investments as something they are interested in. These calculations are all too easy to omit, and this is just another way in which a professional wealth adviser will help you to check your thinking every step of your financial journey. Get in touch so we can tell you more today.
Frauds and fakes on the rise
Investors should be aware that they will be up against corporate investors to own prestige product lines and that fraud is on the rise in whisky just as it is soaring in so many areas. Fakes, frauds and schemes which amount to tax evasion have caught out many people – even those who would not consider themselves amateurs at all. One only has to see how many whisky-focused investments are advertised on social media channels to understand how the hype around a sector attracts those with nefarious intent, and could fuel investment bubbles besides.
There is no doubt that whisky has a lot of potential to deliver stellar returns. Indeed, the golden liquid outperformed wine and prestige cars by a factor of 2-3 times over a decade, and they were themselves strong generators of returns, according to Knight Frank’s indices
There is no doubt that whisky has a lot of potential to deliver stellar returns. Indeed, the golden liquid outperformed wine and prestige cars by a factor of 2-3 times over a decade, and they were themselves strong generators of returns, according to Knight Frank’s indices. As with all passion investments however, whisky returns are highly dependent on changing fashions, the broader economic environment, how specific whisky-loving countries are faring and so on. Even the experts can find it hard to predict what will be tingling tastebuds in the decades to come – although one can be sure that six decades of cask aging before bottling will pay dividends, like the Macallan Adami 1926 has enjoyed.
When to indulge, and how much
Alternative assets can play a really important role in diversification and supercharging returns. That being said, alternatives should probably form quite a small proportion of most investors’ portfolios (perhaps 10-20%) and tangibles a smaller proportion of that in turn. Whisky investing is really booming in popularity and can offer compelling investment returns, although like other highly esoteric assets, it is easy to lose money too – particularly if you do have a sudden need for financial liquidity and have to become a forced seller. Many would advise at least mental segregation of these kinds of investments from the rest of your workaday plan.
If you would like to see how your asset allocation stacks up, and how far you can indulge your passions sensibly, why not let us arrange some no-obligation discussions with a shortlist of experts? Our free wealth manager matching questionnaire only takes a few minutes and you might be surprised at the range of specialist assets our panel institutions are able to cover in house.
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.