New whisky investment fund in Hong Kong looks to rare old times

Posted by Anton Murray Consulting on 17 Jun, 2014

Robin Lynam

Looking to diversify your investment portfolio? How about buying a few interesting bottles of whisky?

Asking prices for the best-known, top-end single malts have risen steeply in recent years, both at auction and in other sectors of the secondary market.

But according to industry experts there are still some bargains to be found, at least for the well informed and well connected. David Robertson certainly falls into that category.

Formerly master distiller for The Macallan on Speyside, and subsequently rare whisky director for The Dalmore, Robertson is now chief investment officer of the Platinum Whisky Investment Fund.

The fund, which was launched in Hong Kong recently and is aimed at high-net-worth individuals, buys and sells expensive whiskies and pays its investors dividends in cash.

Alternatively, if they wish, they can take about 10 per cent of each dividend payment in bottles of discounted rare whiskies from the portfolio.

“The market is moving very fast and there are very small parcels of this type of whisky [old and rare] available,” says Rickesh Kishnani, CEO of Hong Kong-based fine wines and spirits distributor Platinum Wines, who set up the fund.

“It’s all about supply and demand, and now we’re facing a gap between demand and supply of the stock that wasn’t created in the 1980s and 1990s because none of the distillery managers foresaw the demand that is now coming out of Asia.”

It’s notable that he says Asia not China. Kishnani notes that declining prices for recent vintages of top-end Bordeaux are directly attributable to softening demand from the mainland.

But he asserts that demand for precious whiskies is much broader based, both within Asia and internationally, citing strong mature markets in Europe and North America, emerging markets in Latin America and strong demand in Japan, South Korea, Singapore and, spectacularly, in Taiwan.

Those markets, however, are mostly looking at single malts in terms of iconic brands – particularly The Macallan.

Robertson explains that single malts are more attractive from a connoisseur’s point of view. “People like opening these things and the more that are opened and consumed, because these are whiskies of super high quality, the fewer [there are] in circulation, so that becomes a self-perpetuating benefit from our point of view.”

The Macallan is iconic simply because it has been promoted for longer, and better, internationally than any of the others, except Glenfiddich which until recently has been promoted more like a deluxe blend. It also has that status because of marketing tools such as being bottled in record setting Lalique decanters and the Fine and Rare vintage range (which Robertson was instrumental in introducing).

The value still to be had, according to Robertson – whose job it is to find and buy the spirits that make up the fund’s portfolio – lies in less obvious areas.

“We think we’ve identified some products which people at the moment don’t appreciate. Silent stills for example – stills that closed in the 1980s. Everybody knows about Brora, Port Ellen, and Rosebank – and they are appreciating rapidly in terms of value – but there’s a whole host of others that not many people know about that we think will become as prominent and as valuable as those three, given time,” he says.

Robertson, understandably, is holding his cards close to his chest as to which silent stills those might be, but some information is available

He believes there is also value in whiskies that are currently in production but have historic reserves, citing Glenfarclas, which is handled in Hong Kong by Fine Vintage ( as an example.

“They are far too modestly priced for the quality of what they put out. If we think a rare 20 or 25, 30, 40 or 50-year-old is valued below where we see the market moving, that gives us an opportunity,” says Robertson.

“Back in 2008 about 4,000 bottles were sold in the [global] auction market. At the end of 2012 it was about 75,000, so that’s quite a ratchet up in terms of availability.”

Hong Kong has played its role in this with rare whisky auctions conducted by Bonham’s and Sotheby’s – including one by the latter in January at which a new record was set for the price of a single decanter of whisky when The Macallan six-litre “M” Decanter by Lalique fetched HK$4.9 million.

Once bought, whisky has to be stored, but an advantage of investing in it over wine is that it doesn’t have to be stored in a professional cellaring facility.

“If you are storing it at steady temperatures not much greater than 20 or 25 degrees Celsius, and it’s in the dark, the whisky is quite well protected in the bottle,” says Johnnie Walker master blender Dr Jim Beveridge.

He adds, however, that it is not true, as is commonly supposed, that the flavour and aromas of bottled spirits are absolutely stable over time.

“Unlike wine, it’s not going to deteriorate. There could be some movement in the flavour, and some whiskies will change more than others,” he says.

Beveridge is a whisky collector, but, he says, on a modest scale, and his investment is in future drinking pleasure. “Certain expressions are finite, so I understand the logic behind treating them as an investment, but I’m not really in a position to say whether or not it’s a wise investment. I’m a great believer in buying whisky to consume. I sometimes think ‘If only I’d invested in this or that one 20 years ago’, but I didn’t do it. Hindsight is 20/20 isn’t it?”

Hong Kong bar entrepreneur and Angel’s Share proprietor Charlene Dawes is a whisky collector, and has one eye on the investment potential of bottles when she buys, but says that she, too, is more likely to open them with family or friends than sell them.

“I enjoy collecting rare whiskies from Japan and also silent stills. The reason why I collect is I enjoy keeping a piece of history, and whisky is much easier to keep than wine so the value is well maintained. They are not particularly high value items, but I enjoy finding limited edition whiskies that are discontinued. I love the old Bowmore bottlings,” she says.

Dawes, who counsels wrapping bottles in cling film to protect the labels and minimise evaporation through cork shrinkage, thinks a good whisky collection first and foremost should reflect the taste of its owner.

“Don’t collect for the sake of collecting. Identify things you enjoy drinking or special memorable years,” she says.

If you are going to invest in whisky with a view to a future sale at a profit, however, Robertson and Kishnani’s strategy might be a good model.

“From a fund strategy point of view, we really need to be careful to diversify what we invest in,” says Robertson.

“Whisky is already a diversification strategy for most investors, but even within that pie we’re not going to hold 80 per cent of any one brand, vintage or type of whisky.

“We want to ensure that we have a good variety and a good range across iconic brands, rare whiskies, silent stills, aged whiskies and limited edition whiskies. We’ve discussed potentially also looking at Japanese whiskey, Irish whiskey and American bourbon. That sector is not going to make up a majority, which very clearly is going to be single malt Scotch. However, we know of some interesting brands that we could take a play on.”

There are no safe bets, however, and bottles offered at auction do not always make their reserves.

“Macallan’s values at auction in Britain for the 18 and 25 [year olds] have tipped down a fraction in the last quarter. That’s the first time we’ve seen that in years,” Robertson says.

Investment in new limited edition whiskies also presents both risk and opportunity.

“There’s an interesting phenomenon called the ‘new release curve’. When a new release comes to the market everybody wants that, so people try to buy it on the primary market and then flip it on the secondary market. So everybody who didn’t buy it on the primary overpays on the secondary. Then very quickly you get a decrease in value because the secondary market becomes flooded. If you time it right you can buy below the primary market value on the secondary market, depending on the time lag you are prepared to take,” he says.

If that all sounds a bit exhausting, perhaps it’s best to leave the decision making to a fund manager (you can buy into the Platinum Whisky Fund for a minimum of a mere US$250,000).

Or you could just buy what you like to drink in the knowledge that you could well end up doing that anyway.

South China Morning Post

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