Rare whisky no risky investment

ON SATURDAY evening, my husband and I stumbled upon the continent’s largest collection of Japanese whisky. We were after a nightcap and were drawn into Kyoto Garden Sushi by the jeroboams of Japanese whisky winking at us through the window.

It turns out these vast bottles of Nikka From The Barrel were released to commemorate Nikka’s 80th anniversary — and while restaurant owner Scott Wood prefers wine to whisky, he prides himself on his collection.

If you have the time — and permission from your bank manager — I can highly recommend a convivial evening spent with Scott sampling whisky and discussing the finer points of sherry casks and single malts. If you’re lucky, he might even show you his rare bottle of Suntory XO Deluxe brandy.

The problem with developing a taste for fine whiskies is that it is becoming increasingly difficult to get your hands on a bottle. I’m not talking about a bottle of Nikka Pure Malt, or even a Hibiki 12-year-old, but the truly special blends and pure malts that raise the whisky experience to something almost religious.

Part of the reason for this is a surge in investment interest in rare whiskies. Figures released by whisky investment experts Rare Whisky 101 (RW101) last week show that the value of collectible bottles of the Scottish spirit has risen by 19.8% since the start of the year, and a whopping 25% over the past 12 months.

Last year, investments in rare Scotch whisky significantly outpaced other assets such as wine, gold and oil, with the Rare Whisky Apex 1000 index gaining 14.4% compared to gold, which was down 10.4%, and oil, which lost 35%.

The Rare Whisky Apex 1000 is the world’s broadest and most comprehensive index for Scotch whisky and provides a fascinating insight into an asset class that, until recently, was little noticed. The index is compiled by tracking every bottle sold at UK auctions over the past 12 years and identifying the best-performing 1,000 Scotch whiskies. Since 2008, when the index was launched, the topperforming 1,000 whiskies have increased in value by 338%, compared to the top 100, which have increased by more than 700%. Yes, a 700% return in 12 years.

Other more niche indices, such as the Rare Whisky Karuizawa index, which tracks the performance of a select collection of bottles from this silent Japanese distillery, and the Rare Whisky Port Ellen index, which tracks the performance of the first eight official releases from the Port Ellen distillery, give even more gobsmacking results.

Perhaps unsurprisingly, this impressive return on rare whiskies has spawned a private equity fund dedicated to single malts.

The Platinum Whisky Investment Fund was launched in 2014 and manages more than 7,500 bottles of rare single malts including a bottle of special-edition 60year-old malt from the Macallan distillery in Scotland that is valued at $200,000.

In February 2016, the fund had already realised a staggering 26% return on investment since launch, and it doesn’t seem to show any sign of slowing down.

The result is that buying a really special bottle of whisky is an increasingly costly endeavour — if you can even find one. Increased interest in rare Japanese whiskies has also made it extremely difficult for aficionados to get their hands on age-statement whiskies older than 12 years.

According to Bloomberg, some Japanese distilleries have even gone so far as to pull back stock of popular age-statement whiskies and replace them with similar tasting no-age-statement whiskies just to meet the demand.

For example, Nikka announced last year it was delisting 14 of its most popular single malt and ageexpression whiskies. The company was concerned that levels of Yoichi and Miyagikyo malt whiskies, which are used as the base for most of the firm’s whiskies, were running too low and could threaten the future of the business.

In their place it launched several new no-age-statement expressions. Similarly, Suntory stealthily replaced its very popular Hibiki 12year-old with Hibiki Japanese Harmony which, I am told, tastes remarkably similar.

As with any investment, the trick with succeeding in rare whiskies is to know what you are buying. According to RW101, the two most crucial factors to consider are age and vintage.

It stands to reason that even the most dedicated of investors may, from time to time, suffer a lapse in judgment and open a precious bottle, reducing the total number available and increasing the scarcity of the remaining few.

Just writing this piece has made me sufficiently thirsty for a dram to have me check my bank balance and several online whisky stores, so I can’t imagine the self-restraint

The problem with developing a taste for fine whiskies is that it is becoming difficult to get your hands on a bottle It stands to reason that even the most dedicated of investors may suffer a lapse in judgment and open a precious bottle

necessary to keep your hands off a rare bottle.

In the context of scarcity, it also makes sense that bottles from closed or “silent” distilleries are more valuable, as are limited releases or small-batch whiskies. Peaty whiskies seem to appreciate better than others, and historical distilleries such as Ardbeg and Macallan also seem to be favoured by investors.

Interestingly, Japanese whiskies are considered to be more volatile than Scotch. And a large part of this has to do with a journalist. Japanese whiskies had been gaining in popularity for several years, and then whisky writer Jim Murray proclaimed the 2013 Suntory Whisky Yamazaki Sherry Cask the world’s best whisky in his 2015 World Whisky Bible. The effect on Japanese whisky prices was stunning. The Rare Whisky Karuizawa index increased by 74.92% between December 2014 to September 2015, an unprecedented rise in prices that has since seen some retracing.

If you are not an investor, the good news is that the flourishing market in collectible whiskies is in stark contrast to global sales figures for the wider industry. According to the Scottish Whisky Association, the volume of Scotch exports was down 2.8% last year to 1.16-billion bottles from 1.19-billion in 2014.

Although this probably won’t have any effect on international or local prices, it gives me hope that, even with the weaker rand, the normal drinkable stuff is unlikely to spike in price quite as much as the rare collectibles.