Virtually all of us are familiar with the idea of investing in wine and how certain esteemed collectors are able to build highly valuable collections. The fascinating thing is that rare bottled whisky and cask whisky are following a similar path, with a notable number of investors now seeing that they have the potential to outperform traditional investments.
To learn more, we need to look in detail at the factors that drive and create value in this fascinating market.
Scarcity and rarity as value drivers
A limited-edition bottling or a rare cask with full provenance will increase in value in proportion to the number of people who want to buy it and how limited the supply is. By its very nature, the amount of a particular whisky will decrease over time as a certain amount will be consumed every year. Furthermore, Scotch can only be considered Scotch if it’s been matured in Scotland for 3 years, meaning Scotch can’t be produced overnight. This means that investors who are prepared to hold their positions for an extended period of time may be able to achieve returns that outperform traditional assets.
“The market really works on long-term holds. You really want to be thinking 10 years or longer,” says Alphie Valentine, Co-founder of Hackstons, the whisky specialists who provide opportunities for investment and consumption. The point here is that patient investors who adopt positions because they want to go on a journey and appreciate the industry are the ones who will maximise the probability of securing a return.
Rising demand in a global market
Rare bottles of whisky have become increasingly sought-after collectibles in recent years, with the rapid growth in the Asian market being particularly noteworthy. Luxury investors who want to feel a connection with the assets they are investing in are increasingly turning to rare whisky because it is a growing market with an element of prestige.
This is good news for those who already hold investments because whisky is not something that can be quickly scaled up in terms of its production. Before being bottled, whisky must age for a period of years in casks, be stored by specialists, and Scotland’s distilleries only produce a certain amount of whisky each year. As a result, rare whisky, whether in cask or bottle form, becomes a classic example of a high-demand, low-supply asset that has the potential to offer lucrative returns in certain cases.
The benefits of tangible assets
The value of a stock will ebb and flow from one minute to the next and will be very tightly correlated to the performance of other stocks in the market. Whisky, by contrast, is a tangible asset that any investor can see and hold should they wish to, and it’s an asset whose value is by no means strongly linked to stock markets and new economic policy announcements.
At times of economic instability and volatility, investors will often look at these types of tangible assets as a way to hedge against uncertainty. While no whisky investment can ever and should ever guarantee a return to the investor, there is a feeling that investing in something tangible provides a greater degree of stability.
Prestige as a social factor
Everyone will have their own particular viewpoints on this one, but there is a growing number of investors who see investing in whisky as having a real element of prestige to it. Knowing that you have a link and a relationship with a prestigious distillery is something that may make you feel more invested and interested on a personal level. Being able to tell fellow whisky enthusiasts about your holdings and to arrange visits to the storage facilities to see the barrels is something that you may derive a great deal of enjoyment from.
That said, it’s very important, as with any type of investment, to balance enthusiasm and personal interest with pragmatism and due diligence. One of the reasons that investments in rare bottles and casks are able to outperform traditional assets is that there are experts like Hackstons who understand the market.
A maturing market
Whisky investing is an established and growing market. This means that trusted names like Hackstons have the expertise, knowledge, and experience needed to guide new investors through their options in a way that is insightful and transparent.
There will always be new entrants to the market, so looking for social proof, like searching for Hackstons on LinkedIn, will help investors choose an established partner. With the right partner comes key things such as the ability to provide Delivery Orders that provide proof of ownership and allow the investor to verify the nature of the investment. Only then will they be able to adopt the positions that allow them to potentially secure returns that outperform traditional assets.
