Demand for aged whisky is on the rise. The Platinum Whisky Investment Fund is a private fund which has been purchasing old or rare single malt whisky with the aim of slowly releasing the bottles back onto the market at a profit. The one-of-a-kind fund, which is based in the Cayman Islands, was launched in June 2014, with a capitalisation target of US$10 million. It has so far spent US$8 million on 11,400 bottles of whisky. Platinum is the only whisky investment fund in the world.
“We’ve just started exiting the fund,” says Platinum’s Hong Kong-based CEO, Rickesh Kishnani.“We’ve sold about US$3 million of whisky, and we are seeing a gross profit of 62 per cent. Our expectation was to deliver a net profit of 15 per cent per year, so we are performing ahead of that. We’ve only sold a small amount so far, and we’re looking to increase the exit side over the coming few years.”
A whisky investment fund may sound like an odd proposition, but it’s based on sound economics. It’s simply a matter of supply and demand. Although there’s no shortage of whisky in the world, aged single malt whiskies are rare – and there’s an increasing demand for them, says Kishnani, who’s also the CEO of Platinum Wines, a Hong Kong-based luxury wine merchant.
“Three or four years ago, I developed a personal interest in single malt whisky. The plan for Platinum Wines was to import these whiskies the way we import wine. But we found that was not possible, as the supply of old and rare single malt whisky is low, and demand has been growing in major parts of the world for the last 10 years. That sparked the idea.”
A gap in the market has arisen because aged whiskies take, well, absolutely ages to mature. It’s very difficult for distillers to predict what consumers will be drinking 20 years in the future, and they don’t always get it right. That means the supply may not always match the demand.
“To make an 18-year-old Macallan obviously takes 18 years,” Kishnani says. “Distillers have to try and predict what the demand will be for their product around 12, 30, or 35 years in advance – which is, of course, impossible.” He notes that back in 1990, there was an oversupply of whisky on the world market, and this skewed predictions.
Moreover, back then, distillers used less than one per cent of their product for whisky intended to age for 18 years or more. Consequently, there is a dearth of aged single malt whisky on the market today.
“Twenty-six years later, the world is a very different place,” Kishnani says. “There is strong demand in the US market, the UK market is stable, and there is a real growth opportunity here in Asia. We believe there will be a shortage of old and aged single malt whisky, both Japanese and Scotch, for the next 10 years.”
The fund is only open to professional investors, and there is a minimum investment. It’s a small fund, so only individuals, not institutions, can participate. So far, there are 40 investors. “The majority are in Hong Kong, but we also have investors in Singapore, mainland China, Taiwan, the US, and Canada. It’s a broad range of people,” Kishnani says. “Some don’t drink at all, so they are doing it from an investment point of view. They see it as a form of diversification. But we also have people who are passionately interested in whisky.”
Hong Kong-based investor Nathaniel Chan straddles both points of view. Chan is a banker who also part-owns the Malt Whisky Bar in Sheung Wan. “Aged whiskey is in very tight supply,” Chan says. “It’s different to wine, which you can age at home in a bottle – whisky needs to age in a barrel. Interest had been growing, and demand is rising, so the price will go up due to the tight supply.”
As it’s a fund, the investors don’t choose the whiskies themselves. The bottles are sourced by Platinum’s chief investment officer, David Robertson, formerly a master distiller at Macallan.
There are other ways of investing in whisky – for instance the consultancy Whisky Invest Direct, which enables investors to buy and sell litres of unique whiskies via its website. Buyers can choose from 16 brands of one-year-old, two-year-old, and three-year-old whisky, including Glen Spey and Inchgower. Purchasers own the whisky that they buy, and can sell at any time. After expenses, Whisky Invest Direct claims that the return on a whisky that has matured is 7.1 per cent per annum, although the company stresses that the market is “volatile”.
Whisky Direct’s product is blended, but Kishnani stresses that Platinum only deals in single malt. Whiskies he’s excited about include Rosebank, which Kishnani says is a “beautiful lowland distillery that closed in 1993”.
“We also have bottles of Linkwood that were distilled in the 1930s and bottled in the 1970s,” he adds. Japanese whiskies, which have been increasing in stature internationally, are also attractive, he says, citing Karuizawa as an example.
Most of Platinum’s bottles are priced around US$1,000; 30 per cent are worth US$1,500 to US$3,000, and a few go for significantly more.
Whiskey has an advantage over wine, Kishnani says “Once whisky is in a bottle, it never changes – it’s a distilled product,” he says. “You can open a bottle of whisky from any year, and it would still be good today.”
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