Interest in alternative investment has been on an upward trajectory. To be classified as alternative investment, the asset class excludes mom-and-pop’s favourites: stocks and bonds.
Art, wine, watches and cryptocurrencies have proven to be quite lucrative for the prescient few who timed it right. Bitcoins, the darling of cryptocurrencies, have been rousingly entertaining with its absurd mood swings.
On the other hand, exhibiting more restraint, a constellation of Macallan whiskies changed hands for £762,500 recently at a Sotheby’s auction. The 34 rare single malts, belonging to an Italian collector, spanned 1940 and 1976. Nonetheless, whisky as a form of investment is still very much embryonic, confined mostly to auction houses and individuals.
For high-net-worth individuals looking to diversify into the incipient asset class, there is now a private equity fund solely incepted for this purpose. Rare Single Malts is a fund partnership seeking to reward investors through capital appreciation, via the acquisition of exclusive Scotch single malt casks, bottles and collections.
Headed by a team of experienced professionals from banking and finance, as well as savants in whisky, Rare Single Malts harnesses collective expertise and wealth to unearth the liquid gold’s relatively untapped potential.
According to Knight Frank’s Wealth Report, rare single malt Scotch whisky had a stellar 2018. A Macallan bottle distilled in 1926 set a new world record of £700,000 in October 2018, only to be surpassed by a similar bottle a month later, which was transacted for £1 million before the buyer’s premium. Over the decade, from 2010 to 2019, the Knight Frank Rare Whisky Index, which tracks a basket of rare Scottish single malts, has risen in excess of 500%. There is of course conceivable upside to it still as some of these supplies, which are limited due to the nature of production, are depleted through consumption. The feverish demand worldwide has driven Scotch whisky, inclusive of non-single malts, exports to all-time high, reaching £4.9 billion in 2019. Singapore and Taiwan were among the top five importers by value, after the United States and France.
To gain an understanding of Rare Single Malts, we speak to Murray Holdgate, general partner of Rare Finds Worldwide, a Hong Kong-based tailored whisky brokerage which brings to the market the Rare Single Malts private equity fund.
Apart from investing solely in whisky, what are differences between Rare Single Malts and other private equity funds?
Rare Single Malts is an exclusive fund partnership focusing on the acquisition of hard to find rare single malt Scotch whisky casks, blue-chip limited-edition bottles and rare collections. We are a team of whisky investment specialists comprising over 60 years of combined whisky investment and collection building, partnered with alternative investment strategists looking to maximise returns through this outperforming alternative asset.
Which is the jurisdiction that oversees Rare Single Malts?
Rare Single Malts is targeted towards professional investors and high net-worth individuals and is domiciled in the Caymans. The fund is available through a GP/LP Partnership structure with DBS Bank, one of Asia’s leading private banks and is administered independently by Henderson Fiduciary & Corporate Services who report to investors and auditors. The whisky casks and bottles which Rare Single Malts invests in belong to a highly regulated industry with strict and transparent product specifications and storage security within HMRC UK. All whisky casks will be stored and matured in a series of HMRC government bonded warehouses in Scotland until they are sold or transported to a bottling facility.
By targeting but not limited to only Malaysian investors, is Rare Single Malts required to obtain prior regulatory approval from the Securities Commission of Malaysia?
As above. Rare Single Malts is not required to obtain approval as its offering is not made publicly to Malaysian investors.
What is the minimum amount to invest? How much do you intend to raise?
The minimum commitment amount is £100,000. The target is £20,000,000.
What is the term of the fund?
The fund term is for a minimum of 3-5years, with a target annualised return of 15-20%.
What other fees and risks do investors need to be aware of?
There is a 2% management fee, in-line or below with fees of managed funds in more conventional markets.
As whisky is the underlying asset, but with so many distilleries, what is the asset allocation and who decides on which distilleries to procure from?
The asset allocation strategy is as follows – 65% aged/rare casks, 15% opportunistic rare bottles/casks, 10% collections and 10% individual ultra-rare bottles. Each cask and bottle will have its own individual trading strategy but generally we will target casks between 15 and 40 years, bottles that are over 30 years and collections over 18 years. This strategy will allow Rare Single Malts to create significant value and gain market edge via trading, rarity and exit strategies, while realising growth through market appreciation, cask maturation and bottling. Our investment philosophy is that rarity equals returns. A quality versus quantity approach.
What is the time frame for the fund to be fully utilised to secure assets?
Immediately, we have capital and opportunities, but we have a 3-5 year horizon.
Once obtained, the casks will then be stored/matured at HMRC government bonded warehouses instead of the respective distilleries. Will this alter the quality of the eventual whisky in the casks upon maturity and hence the valuation of the asset?
Unlike wine or many other investable commodities, the value of whisky appreciates steadily as the cask ages and interacts with the oak and peat as a natural hedge against sale price. All our cask investments are stored securely in alignment with standard industry practices, ensuring the value of these investments can only appreciate.
What happens to these casks at the end of the fund’s term? If they are bottled, can they still be bottled bearing the labels of the distilleries?
Many of our fund’s investors are not necessarily collectors or consumers of whisky and will be impartial to our approach in exiting the investment. We look to exit and trade a lot of our casks but if at the end of the fund’s term there are casks deemed suitable for bottling, we will tailor our investment approach to maximising returns for our investors.
What are your exit strategies?
We work with a global network of whisky brokerages that specialise in the trading of whisky assets between distilleries, collectors and investors. They have a network of whisky investors and collectors that have the appetite to buy and sell products. This includes premier auction houses, online platforms and high-end retail outlets such as hotels, whisky bars, luxury and retail outlets. This market is highly liquid at the moment, compared to just over a few years ago, mainly due to the increasing prominence of social media in promoting whisky investing.