Some bottles sell for huge sums and the market for fine whisky has posted the kind of price gains that attract high net worth investors, among others. A new way of tapping into the market in Singapore opened up with the launch of asset-backed securities connected to whisky. Can such investing warm investors' portfolios?
Lovers of fine drinking recently marked Burns Night (25 January) – a major fixture in the Scottish calendar – by consuming their favourite brands of single-malt whisky, not to mention the meat dish of haggis. (Readers’ mileage may vary about their appetite for such a dish.) A fortnight ago, Rare Cask Holdings Pte, a wholly-owned subsidiary of PrimePartners Corporate Finance Holdings, listed asset- backed securities, linked to casks of whisky, on Singapore’s Hg Exchange.
The market for fine wine and whisky, along with other
collectables such as classic Ferraris, Patek Philippe
wristwatches and Faberge jewellery, attracts large sums. The
allure is both the pleasure of owning – and hopefully using – the
items, and also profiting from a rise in its value. At a time
when central banks have hosed markets with liquidity, there are
concerns about eventual inflation. Collectables can, so some
argue, be an inflation hedge. And some investors are switching to
funds and similar structures to tap into these assets rather than
buying and selling directly, such as through an auction. A
specialist industry has sprouted, which employs some of the
modern tech platforms used to trade more conventional
assets. The value of whisky has surged by 582 per cent since
2009, according to Knight Frank’s 2019 Wealth Report. Some
bottles sell for huge sums. A 1926 60-year-old Macallan “Michael
Dillon label” fetched £1.2 million ($1.64 million) in 2018;
another similar bottle fetched £1.5 million in 2019 (source:
The Drinks Business, December 2020).
This news service talked to Rare Cask Holdings about the Singapore venture.
What sort of investment returns do you achieve from
investing in a mix of whiskies?
Over the past decade, whisky has quietly come into its own as an underrated investment asset, enjoying more liquidity than many other luxury asset investments, including fine wine. In October 2018, a bottle of rare single malt Scotch whisky (the Macallan Valerio Adami 1926) was sold for £700,000 ($961,000), setting a new world record price. Just a year later, the same bottle was sold for an impressive $1,500,000, at an auction held by Sotheby’s. The total value of whisky traded through auction rose 37 per cent in 2019 to a record high of €70.5 million ($85.7 million), from €51.5 million in 2018.
Whisky is a unique investment asset because it is sought after for both consumption and investment purposes. As bottles from a rare cask are consumed, every remaining bottle from that cask becomes rarer and more valuable - possibly providing a long-term hedge against inflation.
The ABS are backed by the highest quality, most premium whiskies from world-renowned distilleries including Port Ellen, Mortlach, Caol Ila, Talisker and others. The ABS allows accredited investors to own a portion of these whisky casks for a fraction of that price.
Do accredited investors buying such securities incur any
particular fees? Are there certain minimums they must put in to
buy such securities?
There is no minimum investment amount for this unique product, though it is worth noting that each ABS token purchased represents one bottle of the particular whisky selected. Competitive fees apply and are determined by member firms on a transaction-by-transaction basis.
What sort of risks would you say need to be flagged to
anyone thinking about this sort of investment?
They key thing investors should be aware of is that authenticity matters. The majority of whisky trading currently takes place through an auction. When whisky is bought through an auction site, it is difficult to ascertain the authenticity of the liquid in the bottle. Instead, there is a reliance on the auction site to sieve through thousands of bottles monthly and pick out those of questionable provenance.
The ABS offered by Rare Cask Holdings eliminates such issues as the ABS is secured against casks that are currently still stored and aged onsite at the supplier’s distilleries and warehouses. By listing these ABS on HGX, the provenance of the underlying whisky assets are guaranteed. Counterparty risks are also minimised as HGX is a MAS-regulated private exchange - only verified Accredited Investors can trade on HGX, and the supplier will directly bottle and deliver the bottles of whiskies to Freeport Singapore.
Why in your view has whisky become such a popular asset
Globally, increasing standards of living, changes in lifestyle, consumption habits and a spike in demand in new markets such as China, are major factors propelling the sustained long-term growth in demand for whisky.
Also, as we enter an era of low interest rates, smart money is increasingly gravitating towards alternative investments as the hunt for yield continues to grow, alongside an increasing desire for diversification from public markets. The fact that whisky can be consumed and therefore becomes rarer and more valuable over time also makes it a sought-after investment as a potential long-term hedge against inflation.
Are there other types of drinks that might become hot
investment ideas (brandy for instance)?
Luxury beverages is a space we’re watching very closely as the demand for alternative investments continues to grow rapidly. We may consider future listings of high-end whisky and wine portfolios, among others. This first ABS offering is a proof of concept that will hopefully lead the way for other unique alternative assets to be listed.
Does your firm do seminars etc to educate and inform
investors about whisky, the varieties, etc?
As a consortium-led private exchange, we take a bottom-up approach to building the Exchange of the Future and pride ourselves on the leading expertise of the members across our network. Our educational initiatives include presentations on alternative asset products organised by our member firms such as Fundnel, PrimePartners and Philip Capital, as well as proprietary research on alternative investments that are exclusively available to all accredited investors on our platform.