Yesterday’s sale of a cask of rare whisky for a record sum of just over £1.0mln has sparked interest in investing in “the water of life”.
There are few things are more delightful than finding a tenner in a rarely worn jacket but scooping a million quid from the sale of a crate of whisky you had forgotten about tops it by some distance.
That was the happy event for a private individual based in the US who bought the cask of Macallan single malt whisky last century and who was recently reminded that the cask was still awaiting collection some 34 years later.
The cask sold for £1,017,000 on the WhiskeyHammer.com auction site. That works out at roughly £1,900 per 70cl bottle, assuming the whiskey ever gets decanted into bottles.
It was not revealed how much the now millionaire (if he wasn’t already) whisky connoisseur paid for the cask but the most expensive bottle of whiskey currently available for purchase on The Macallan Distillery’s online shop costs £270 so it is probably safe to say the investment has been a good one.
According to the London Cask Company, one of many companies that enable investors to take a punt on rising whisky prices, rare whisky or whiskey (traditionally, the “whisky” spelling is reserved for Scotch) is an increasingly popular alternative investment that holds the double appeal of potentially steady, tax-free growth combined with relatively low risk.
“Due to their lack of correlation with the stock market, whiskey investments are an attractive addition to a balanced investment portfolio,” the company’s website says.
By balanced portfolio, the company presumably does not mean the rest of the portfolio should be made up of crates of gin …
According to the Knight Frank Wealth Report, rare whiskey prices have increased by 586% over the last decade.
There are the usual caveats that the value of the investment can go down as well as up but the London Cask Company flags “up to an estimated 13%” increase per annum on rare whisk(e)y, before hastily adding this is not guaranteed.
Another whisky investment site, Whiskyinvestdirect.com, reckons that good returns from whisky maturation have been achieved over many years but the lion’s share of the profit has been taken by distillers and blenders.
Its mission was to enable private investors to buy quality whiskies at wholesale prices, which it is possible to do on the London International Vintners Exchange (Liv-ex), where whisky is a traded commodity.
It claims to have around 5,000 customers who own enough whisky to fill more than 80,000 casks, which is the equivalent of 36mln bottles.
Accounts range in size from £700 to £750,000, the company’s website reported.
The Whisky Invest Direct site is a variation on the crowdfunding idea. Users deposit money with the website and use that money to buy whisky. The whisky matures in the cask, safe in the distiller’s bonded warehouse; the distiller will charge a fee for this, however – typically around 17.5p per litre of pure alcohol per year.
Lastly, when the time is right, the whisky is sold. Ian Buxton, who writes for the retailer Master of Malt's blog, warns that “prices bear increasingly little resemblance to trade filling prices, suggesting that should the private buyer wish to liquidate their investment by selling into the blending market an unpleasant surprise awaits”.
A true collectors’ item, Double Eagle Very Rare is presented in a luxurious silver box and crystal decanter. Very few bottles were produced, with an individually-numbered letter of authenticity included with each.https://t.co/Gy58imKEto pic.twitter.com/zafmCTz5fD
— Master of Malt (@MasterOfMalt) April 21, 2022
Even Whisky Invest Direct admits prices can be volatile so the investment would probably suit someone who can take a long term view.
According to Whisky Invest Direct, the cash price for 8-year old Scotch whisky bought new, and sold each year of the decade 2011-2020 shows average historical returns of 15.4% per annum.
Adjusting for inflation, costs and commission, the real historical concerns would have been 7.9% a year.
Compared to, say, Bitcoin, that sort of return is nothing to write home about but if the worst comes to the worst, you can always drink the whisky.