Some investors buy whisky by the barrel as hedge to inflation

Nigel Isherwood was so concerned about the fate of the global financial system last year that he turned to booze.

Since July, Isherwood has used a United Kingdom-based exchange to buy $51,300 of unbottled whisky still maturing inside 53-gallon oak casks — a bet that the Scotch will increase in value over time. His portfolio also includes fine French wine and precious metals. He sees those nontraditional assets as a financial hedge, especially if inflation takes off.

“I don’t know anything about whisky, but it doesn’t matter to me,” Isherwood, 50, said by email from Adelaide, South Australia, where he works as a sports coach. “I know that spreading capital around is always good sense. Maturing whisky fits my investment principles.”

With 40-year-old Scotch fetching more than $2,000 a bottle and consumption of all whiskies growing globally, it’s perhaps no surprise that investors would look to profit from the market. Price increases over the past eight years have been more than double those of gold or silver, based on industry data tracked by WhiskyInvestDirect, which offers trading in casks from 18 Scottish distilleries.

Scotland, the world’s biggest whisky seller, exports more than 1 billion bottles a year and makes the only kind that can be called Scotch, according to the Scotch Whisky Association. The country has about 20 million maturing casks in warehouses. It takes at least three years before the spirits can be bottled, though higher-end varieties may sit for 12 years or more. A typical cask contains enough for about 267 standard 23-ounce bottles.

The owners of Londonbased Galmarley Ltd., which founded WhiskyInvestDirect, figured all those liters sitting for years in warehouses could be bought and sold by investors, which had the potential to transform the way distilleries finance their businesses. Galmarley has some related experience. In 2003, it created BullionVault, a platform for trading physical gold and silver that now handles about $2 billion in transactions annually.

“Whisky in a barrel is getting better all the time, unlike gold and silver,” said Rupert Patrick, the chief executive officer of WhiskyInvestDirect who had worked 24 years in the industry, first at a Scottish distiller and then for distributors Diageo PLC and Beam Suntory Inc. “The prices have gone up as you keep it and improve it. When we look at other asset classes, and other options of investing money such as bonds and stocks, it’s a pretty good return.”

Based on average historical prices, newly produced Scotch over the past eight years is up about 143 percent, excluding storage and trading costs, according to the exchange. Over that same period, gold gained 48 percent and silver advanced 55 percent. Whisky also outperformed the main equity indexes in Europe and Japan, though it was eclipsed by the U.S. benchmark, the Standard & Poor’s 500 Index, which jumped 170 percent.

The whisky exchange got its start in 2015 by acquiring some maturing casks in warehouses and then offering them for sale. Customers trade by the liter, and owners pay additional fees for storage. The online platform is open all day, every day.