Balanced investment portfolios often incorporate luxury assets because they typically demonstrate little to no correlation with financial markets. Luxury assets have historically tended to perform well and provided stable returns during periods of inflation, often outperforming financial assets. Past perform is not an indicator for future returns, however.
Fundamentally, purchasing a whisky cask is based on waiting between five to ten years as a minimum for alcohol to mature before either selling the cask on at a premium once aged, or bottling the stored alcohol and selling the individual bottles. Whilst the latter is more lucrative, it can be much more labour intensive, costly, and requires industry connections and know-how.
Regarding cask acquisition, the focus can either be on established scotch whisky distilleries with large international consumer bases, or new up and coming distilleries within Scotland or from other geographies such as Ireland.
Ensure that you own the asset outright. Part of the attraction of alternative physical asset classes such as whisky casks or vintage wine is the ability to have a mixture of both paper and physical assets within the portfolio but to avoid leverage with mortgages as is often the case in real estate investments.
Make sure that irrespective of which cask provider you go through, the certificate of ownership is in your name not the company’s. Make sure you are not overpaying for the asset. If you are looking to hold for ten years for instance and sell a whisky cask once it reaches 25 years old, make sure there is a sufficient arbitrage between the price paid and the expected recommended retail price per bottle of that whisky to generate a healthy profit and cover sale costs.
Liquidity. Most physical assets including property are illiquid compared to financial asset comparatives and it is imperative to budget correctly and ensure that any capital locked away in physical asset investments is not needed until the proposed maturity date/exit strategy for that asset. The sale process can take time as it requires a buyer to be sourced, price negotiated, and for the sale documents to be drafted and signed by both parties. Only invest capital you can afford to park for a meaningful length of time.
