In A Discussion With Altvest:
Whisky - An Unusual But
Profitable Investment
10 March 2020 David Grammig, 5 min read
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— On your website you state "thinking outside the box". What does Altvest's thinking outside the box look like?
— With a strong background in wealth management, we started Altvest to focus on tangible or real assets which have either been unavailable, or at least difficult for the majority of investors to gain any physical access to. When we look at asset management as a whole, many investors are heavily weighted to financial instruments, even in the most diversified of portfolios. Whilst the need to include alternative investments within a portfolio is well documented, holding genuine real assets is not commonplace. The meaning behind "Thinking Outside of the Box" is about broadening an investor's horizons and offering truly diverse portfolio options with a firm focus on both growth and asset protection, where access has at best been limited and even restrictive in the past. We have achieved this by setting up key partnerships across the World with experts in each sector where we operate, to truly bring superior asset management facilitating access to investors throughout the spectrum.
— Why do you think investors appreciate a different approach, an approach like the one you take?
— We constantly listen to feedback from our clients, adapting our proposition accordingly, in turn investors seem to truly appreciate our direct, honest and evolving approach. We manage the entire process for our clients and conduct in depth due diligence on all assets classes and partners before bringing all that we have learned together in order to give investors a clear picture, expert insight and ultimately, unique opportunities. Other than the obvious aspects such as performance, and tax efficiency our clients have grown to appreciate the investment opportunities which we offer access to.
— One of the more unusual investment opportunities are Whisky casks.
What makes them so attractive?
— That's a great question. Whisky casks have undoubtably been an extremely popular asset for our clients and investors, and an area where we bring great expertise. We focus on Single Malt Scotch Whisky casks which unlike fine wine, continue to mature only in the cask, not the bottle. When thinking of investing in any beverage, investors instantly think of fine wine, however whisky has outperformed the fine wine market considerably over the past decade, yet hasn't been talked about or publicised in as much detail. What makes it so attractive… it's intrinsic value. Maturing Whisky is guaranteed to get better with age and thus, increase in value with each passing year. With 90% of all whisky being bottled or blended before it reaches the age of 12 years old, there is limited supply which diminishes over time. If we had to pinpoint the key areas which make whisky an exciting and attractive opportunity for investors, we'd have to say the high non-correlated returns it offers, it's proven tax efficiency, it's a real asset which is held securely in bonded warehouses in Scotland owned directly by the investor rather than through an elaborate structure, all casks are insured and as an industry governed directly by HMRC in the UK and finally, there are multiple exit points for investors over very realistic and varied timeframes.
— How would you describe the typical investor profile of someone putting money in Whisky casks?
— In recent years this has changed significantly as the industry has gained more of a spotlight through very successful options and dare I say it, the volatility which financial markets have been enduring in recent times. This has opened up the market to a diverse range of investors. Traditionally this was an area which was typically reserved for UHNW investors, family offices or those within the whisky industry, however there is now a significant shift from individual investors across the spectrum looking to diversify and/or take advantage of the proven and secure growth which whisky offers. Not all investors will have the means to invest in say Macallan casks which are much rarer and sit atop the price range, however with good quality casks ranging anywhere from £3000-£100,000 effective portfolios can be constructed to suit investors of all variations, from individual investors through to multi-family offices and institutional investors.
— What are the particular risks connected to such an investment?
— This is a question we are frequently asked, and of course it's a very important one. A slightly tongue in cheek answer is that the main risk for investors is that the world simply stops drinking whisky. With the data we have available on Scotch Whisky exports, the recent relaxation of import tariffs from the USA on Scotch, double digit annual growth on imports in key new markets such as India, China and numerous countries in Africa, we simply can't see that happening. The supply and demand figures simply speak for themselves. All other risks are carefully managed, such as ensuring that casks are held correctly, regularly checked to ensure that the whisky is maturing as it should be all the way through to all casks being expertly insured, this mitigates the risks for investors.
— What kind of returns can an investor expect?
— We like to be conservative with our estimates, though investors should expect annualised growth in the region of 8-12% as a baseline assuming a standard holding period of 3-5 years, though this can vary dependent on the specific requirements. Returns are typically further enhanced by the expert selection and combination of the cask itself, the age of the spirit and the distillery it originates from. A client recently sold a cask which he held for 20 years, making over 4100% profit, so there are opportunities to suit all appetites.
— Let's speak about the practicalities of investing in Whisky. Where does an investor store these casks?
— Scotch Whisky regulations stipulate that all casks must be stored and bottled in Scotland to be considered Scotch. All casks are stored in UK Government bonded (duty suspended) warehouses in Scotland, this ensures asset protection and that the casks are in the safest of hands. Whilst casks may change hands several times throughout their life, they may only ever be stored in a Government bonded warehouse until being bottled!
— How is ownership of the investments ensured?
— We ensure provenance for all casks which our clients invest in. When a cask is originally filled with spirit at the distillery, all details are logged with HMRC and each specific cask is tracked all along its maturation journey until it is bottled or removed from bonded storage. This way we can ensure the provenance. When an investor purchases any cask, this is transacted only on confirmation of the latest information on both the cask and its contents, verified by the storage facility prior to purchase. Ownership is transferred to the investor and logged with HMRC and investors have all information on the cask and its whereabouts – they can even physically visit the warehouse where it sits should they wish!
— Are Whisky casks only options for the super wealthy or would you suggest this investment also to normal investors?
— As mentioned before, whisky really is an asset which can be considered by investors throughout the investment spectrum and is no longer reserved solely for UHNW or institutional investors. We deal with investors who purchase single casks as a one off investment, investors who purchase one or two casks each month all the way through to family offices and collectors who purchase casks in much larger quantities, it really is an asset that lends itself well to all types of investors.