Private Equity Fund Expects Wealthy Individuals to Develop a Taste for Rare Whisky

  • The Whisky fund is targeting a very healthy annual return rate of between 15 per cent and 20 per cent in the next five to seven years.

  • Whisky is outperforming assets across the board and is a flight to safety in these uncertain times. It's liquid gold and we’re definitely seeing a thirst investing in Whisky for 2020 and beyond.

Rare Single Malts aims to raise a total £20 million (US$24.88 million) in capital in Hong Kong and select other cities around the world, which it will then use to buy limited, rare and vintage whisky bottles, collections and casks.

Whisky collectors must chip in a minimum of £100,000 (US$124,400), and leave  for at least five years.

“Whisky is one of the best performing assets,” compared with other alternative assets and collectibles, said Holdgate, who is also founder of Platinum Rise Capital Partners (PRCP), a development finance company that specialises in the real estate sector.

Rare whisky has become a favourite of some wealthy collectors. Last year, a rare bottle of 60-year-old single malt Macallan 1926 sold for a world record £1.5 million (US$1.87 million) at a London auction.

  • Rare Single Malts aims to raise nearly US$25 million in Hong Kong and elsewhere to for casks of whisky to hold and sell later.

The 2019 Knight Frank’s Luxury Index suggests rare whisky has outperformed other luxury assets.

In the decade up to the end of 2019, the latest data available, the value of rare whisky jumped by 564 per cent, outperforming other luxury assets including coins, cars, art, wine, watches and diamonds, according to the Knight Frank index. Second-place coins rose by 175 per cent during the same period.

In comparison, over the decade up to the end of 2019, Tencent’s stock in Hong Kong jumped over 1,000 per cent, gold rose over 400 per cent, and the Hang Seng Index rose 23.4 per cent.

Meanwhile, the Rare Whisky Apex 1000 Index, which is tracked by whisky consultancy firm Rare Whisky 101 and reflects the value of a collection of one thousand of the most sought-after bottles of whisky, rose 836.2 per cent from December 19, 2008 to May 25, 2020. Likewise, the Rare Whisky Icon 100 Index that includes 100 iconic collectors’ bottles regularly traded at action in the UK increased 506.4 per cent during the same period.

But whisky collectors think it has an edge, as wealthy Chinese and other Asians increasingly turn to luxury collecting.

“In the 80s and 90s and during the market crashes, what you saw was a lot of these distilleries actually sold out their whiskys, and they could not actually predict that there was going to be this big demand 30 to 40 years later. Particularly, when you look at Asia. Asia is now coming in and really starting to pick up on the rare end of the market,” said Holdgate.

The fund will primarily consist of casks, produced by well-known distilleries with brands and history, said Freeman Ho Chun-wing, whisky specialist at Rare Finds Worldwide who will help find which whisky products to buy and has a network of customers.

Cask collection gives collectors more options. They can bottle their own product, meaning more stable returns, he said.

“Cask is a relatively stable in terms of price and has an increasing intrinsic value over the years through ageing. When it stays at the cask, the quality of the liquid increases every single year as opposed to bottle. Bottle prices solely rely on the popularity of these particular bottles,” said Ho. Once the whisky is bottled, it will no longer age.

The Rare Single Malts is mainly targeting 15-year-old to 40-year-old rare whisky casks, over 30 year-old bottles, and over 18 year-old collections. All casks are stored in insured bonded warehouses in Scotland and registered with the UK government’s department HM Revenue and Customs.

In terms of how the collectors get their money back, the fund will rely on its brokerage to sell the liquid, said Holdgate.

“We're also looking at quality over quantity. We could go out and buy 5,000 cars or 10,000 bottles with the same amount of money. However, when you come to exit, those will be very hard during the process. If we buy, let’s say, maybe 20 or 30 casks, we can easily sell and bottle those, with the correct step strategies also utilising the broker markets and auctions.”

Rare Single Malts is not the first whisky fund. In 2014, a private fund, the Platinum Whisky Fund raised about $12 million from 50 private collectors in Hong Kong. In 2018, the Single Malt Fund, the world’s first regulated whisky  fund, was listed on Stockholm’s Nordic Growth Market Exchange in Sweden and will be liquidated after six years with a targeted annual return of about 10 per cent.

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