A bottle of single malt has raised the whisky auction record by 37.3% per annum, amid a flurry of spectacular collectibles sales that have drawn strong attention to the market.
The $632,708 price, set at Sotheby’s Hong Kong on January 18 by a 6-litre Macallan M decanter, beats the 2010 record of $460,000 and caps a series of fantastic figures for Scotch that have whet the whistles of investors.
According to Whisky Highland, which offers advice for the collector/investor, the 100 top-performing bottles of single malt Scotch whisky have grown in value by 39.5% since 2010, and excitement is increasing.
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Founder of whisky investment club 1494, David McClelland, comments: "Whiskey is emerging as a new alternative investment because the supply of rare whiskeys is very limited.
"While the value of gold rose 146% in the four-year period from 2008 to 2011, an investment in the top 10 performing whiskies would have achieved a gain of more than 400%.”
The 1494 club is the first of its kind to be established in New York, with the market stimulated by a 2007 change in law that allowed auction houses to sell whisky. Scotland has several similar organisations, which not only offer investment, storage and information, but a place to meet with fellow investors.
Mohammad Kamal Syed, head of strategic solutions at UK private bank Coutts, which recently published a report on “passion investments,” agrees that collectibles such as whisky have many advantages. "The benefit is more than just profit. Owners can bond with like-minded people in an elite network, with assets offering escapism,” he says.
A shared fate?
Yet amid this boom, with bullish pundits ceaselessly spouting the benefits of whisky investment, one cannot help but think of the ailing wine sector – a market that, back in the mid-2000s, saw a similar rise in popularity to whisky, only for the bubble to burst in 2011 after irresponsible bids caused unsustainable values.
The whisky market shares a similar demographic to wine, with a surge of new investors joining from Asia.
So, if wine’s example is anything to go by, the hype surrounding whisky investment could be risky and the market certainly has yet to mature. So, what is attracting these new investors to the sector, aside from those tempting returns?
Prestige piques interest
Mohammad Kamal Syed touched upon the answer to the question: whisky is an “object of desire”, also termed as a “passion investment”, and the owner of the finest bottles is awarded a certain level of prestige.
For many in developing nations, where new wealth in the middle classes is something of a novelty, whisky joins the list of prestige collectibles such as art, jewellery and luxury watches, and many will make “gotta have it”-sized bids to ensure they own the best items.
The question remains as to whether lessons will be learned from the wine market, which has yet to recover from the sharp correction in 2011.
Know your Irish from your elbow
As values increase for the top investable whiskies, so will the price of lesser grade bottles that aren’t suitable for investment, leaving the market full of pitfalls for those without the correct knowledge.
"You'll get your head handed to you if you don't know what you are doing," wine collector and investor Kenneth Waltzer told CNBC.
This is a market driven by dedicated connoisseurs, who have devoted their time to learning everything about the top tipples, leaving them ideally placed to weather any storm that may hit the whisky market. Even if the very worst happens and their collection is deemed worthless, the collector will be left with a collection of outstanding whisky that will keep them in drink for many years in the future.
The investor with little interest in Scotch, however, could end up with little more than a cellar full of brown water in which to drown their sorrows.
Yet it’s not too late to learn. This market is still in its infancy, and the right investor could easily get their head round the ins and outs of whisky buying with the help of a knowledgeable advisor – and a whole lot of tasting. A growing number of investment funds and superb forecasts for the market (insiders believe the whisky market could be worth $27m by 2020, a potential rise of 325%) could see Scotch stand among the most worthy investments in years to come.
Ready to join in? The media is awash with experts willing to give their advice, so I’ll give you the general message: Stick to single malt Scotch from a single cask, and ensure it has impeccable provenance to avoid counterfeits.
As ever, buy the best you can afford. Think rare, low-production or special edition bottles. Brands such as The Macallan, Glenfiddich, Dalmore and Ardbeg are among the most popular.
Top 10 investment-grade whiskies in 2013
- The Macallan
- Port Ellen
- The Dalmore
- Glenury Royal
- Highland Park