Whisky makes for good investment as demand for aged and rare single malts grows

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.