Is Scotch the next alternative asset class?
Where cryptocurrency offers huge risk in a volatile market, a cask of fine Scotch will mature into liquid gold – plus, you can drink it
In April 2022, the digital auction hammer went down for a record sum. A rare cask of Macallan whisky, bought for £5,000 in 1988, sold for £1 million in an online bidding war. This probably would have been a shock for the owner – who had forgotten they had purchased it 34 years ago until reminded by the famed distillery – but people in the whisky industry knew a stand-out sale had been brewing for a while. It surpassed the previous auction record for a single cask, which was £444,000 in 2019, but it was nothing on what was to come. A few months later, Ardbeg distillery sold its Cask No 3 to an anonymous collector for £16 million. It was an unprecedented sum and one that prompted plenty of thought among whisky enthusiasts collectors and those simply interested in alternative investments. It also reinforced the work Vintage Acquisitions had been doing for the past 11 years.
Traders of whisky casks, Vintage Acquisitions (trading name of Brooks & Whitaker Limited) works with the best Scottish distilleries to bring some of the rarest and most potentially valuable barrels to private investors.
The premise is straightforward: clients sit down with the team, discuss what they’re looking for in terms of price and longevity, purchase one or more casks and then wait for them to mature and gain in value and rarity.
The basic idea is that the longer the client holds on to the cask, the more the whisky naturally improves, becoming rarer and more desirable in the process. It is a concept that, judging by recent auction results, has lots of potential.
Those looking to invest their money have more options today than ever before. The traditional routes might be through stocks, bonds or cash investments through banks or other means. But there are other, more tangible ways, including property, art and antiques, cars, watches and precious metal or jewellery.
A popular choice today is cryptocurrency, with many swearing by it as a means of overnight success. The potential for earnings with crypto is unlimited, but the volatility of the market puts many people off it. Investing in whisky can be viewed as the antithesis of this. It is a slow process that requires many years of patience. It won’t make you a millionaire overnight, but you also won’t lose money overnight.
“People purchase casks for a number of different reasons,” says Sam Brooks, founding director of Vintage Acquisitions. “Ninety per cent of our clients purchase for investment – they want to hang on to the whisky for five, 10, 15, 20 years and potentially enjoy the transformation of the spirit through samples drawn, then sell it on for a higher price.
“The longevity of casks also make them an ideal investment for children or grandchildren, and could help pay for a deposit on a property, university fees or maybe even a travel fund. Some people purchase to bottle the whisky for a special occasion and actually consume it, which is something we can manage from start to finish through our bottling company, Vintage Bottlers.”
That last point is perhaps the most interesting. With many investments, you’re somewhat relinquishing control. Put cash into bonds or Bitcoin, and you’re at the mercy of the market. You might be doing well one week, then take a drastic turn the next.
Whisky isn’t tied to markets, so it doesn’t fluctuate in this way. It’s tangible product you can touch, smell and taste. Buy a cask through Vintage Acquisitions and you’ll be the sole owner of its contents. Bottle it straight away if you like, hold on to it for as long as you wish or aution it off to the highest bidder – the choice is yours.
Another benefit is that whisky is classed as a “wasting asset”. Rather ironically, this is something considered to have a “predictable life that does not exceed 50 years” and is “likely to become less valuable over its predictable life”, according to HMRC. Like cars and watches, then, whisky isn’t subject to capital gains tax, meaning you won’t have to pay tax on the profit when you sell it on.
Pride in the product
But until you sell, you can rest assured your cask is in safe hands with Vintage Acquisitions. The company is more actively involved in the whisky trade than many of its competitors and it takes pride in being more than just another broker.
“There are a lot of other companies out there that are brokers, but we’re actually stockists,” Brooks says. “We hold between £1 million and £2 million of stock on any given day that’s brought and paid for, ready to trade to our clients. That means they can get the widest range of premium Scotch whisky casks in one place. They don’t have to shop around.”
Once you’ve made an investment, there are two ways you can go about storing your cask. Perhaps the most straightforward is to let Vintage Acquisitions handle it for you. Casks are securely kept in one of its HMRC-approved warehouses in Scotland, where they are regularly checked and maintained to ensure the correct level of alcohol is still present. A certificate of ownership, signed by Brooks, ensures that the client remains the legal owner of the cask if anything were to happen to Vintage Acquisitions or the warehouse. Priding itself on transparency, Vintage Accquisitions also encourages clients to go their own wat if they wish. Individuals can store casks in their own approved warehouses and take on insurance costs themselves.
Either way, the group’s sister company, Vintage Bottlers, is on hand to bottle up the barrels for clients, if and when the time comes. This complete 360-degree approach is what sets the brand apart, making investing a relatively painless and informative process – so whether you’re a whisky connoisseur or a newbie, chances are you’ll learn something along the way.