FINE wines may have been the boutique investment of last year but now investors are turning to whisky. A surplus of Bordeaux has dulled the appeal of immature claret in favour of classic Scotch, say wine and spirit sellers. Until recent years, buying Scotch whisky from a distillery was the domain of the wealthy but avenues for small investors to buy from the source have come on line as the price of, and demand for, whisky have increased. Spirit management companies or brokers who buy up whisky on behalf of a pool of investors have also been instrumental in opening the investment to smaller buyers. Distillery whisky comes in two sizes. Investors can buy either a hogshead or a sherry-butt sized barrel. A hogshead contains 250 litres and supplies close to 400 bottles. The larger sherry-butt produces 800 bottles. A typical hogshead costs GBP950 (about HK$11,700). As well as varying in size, casks also differ in the extent to which the whisky evaporates. The average cask loses about two per cent per year through evaporation. The message from distillers and their agents goes along these lines: Buy a barrel of a great whisky blend at a low price and pay a small fee of between GBP10 and GBP25 per year for its upkeep. Then sell it at a substantial profit or drink it yourself at a hugely discounted price. It might sound like a 'win-win' situation but the investment is obviously less of a gamble for whisky lovers. Lewis Daulby, managing director of Gibraltar-based wine management and brokerage company Hamilton's, which will soon be marketing distillery whisky in Hong Kong, urged investors to remember that buying whisky was vastly different to investing in the stock market. 'You definitely won't double your money overnight. In fact, you may have to wait 10 years before realising a return,' he said. Investors have several options once they have made their purchase. Casks can be bottled in three tranches over a period of years and the unbottled whisky can remain in bond and ordered when required. This spreads the duty and VAT (value-added tax) payments over several years. Alternatively, the cask can be sold back to the distillery or to another buyer. Tax is only payable once the cask is removed from bond. In other words, there is no tax liability provided the cask is sold under bond. Mr Daulby said titles of ownership were issued to buyers so their purchase remained secure. Not every distillery will enter into arrangements with individual investors but those that do can often steer investors through the range of buying decisions. Long-distance investors must rely on help from brokers. Considerations include the brand of Scotch, type and size of the cask, age and maturation. Hamilton's sales co-ordinator Lee Rosser said figures compiled by investment bank J P Morgan showed that, based on a 12-year projection where current bulk prices stayed at around the same level, a single malt such as Springbank would give an annual return of 18 per cent. Mr Rosser said the average whisky investment was about GBP5,000 and that most first-time buyers started with a good single malt costing close to GBP1,100. 'This is a new investment and most people like to start small,' he said. As an independent broker, Hamilton's buys from distilleries on behalf of clients. It also sources bulk supplies of whisky. The company plans to visit Hong Kong to gauge the level of investor interest. 'If it is as strong as we expect then we may establish a sales office here,' Mr Rosser said.