Financial uncertainty, rising inflation, and political and trade disruption over the last few years has left a lot of investors looking to diversify their portfolios. Even for those who don’t make investment a regular habit, there’s been a lot of space for thinking about the future, and how best to prepare for retirement or how to give children a strong financial start in life.
With interest rates for much of the globe failing to pick up since the financial crisis over a decade ago, savings accounts provide little hope for those looking for higher returns.
Many people’s first thoughts when it comes to investment may be traditional assets such as stocks and shares, but a tumultuous few years has reinforced the fact that these aren’t an ideal fit for anyone who doesn’t want to be constantly watching markets.
Alternative assets have been becoming more and more attractive to investors new and old, as they’re typically more stable and can offer greater long term returns.
What Are Alternative Assets?
These are often defined as anything that doesn’t sit within the usual categories of ‘traditional assets’, like cash, bonds or shares.
There are many different types of alternative asset, which can include more complex financial packages such as hedge funds and private equity, which often require a deal of financial expertise and can be hard to value. Alternative assets also include tangible assets – i.e. physical assets that exist beyond a computer screen.
It’s likely that you’ve already dabbled in this world. For most people, it’s buying and selling property, for others a family heirloom constitutes a tangible asset that can often hold significant financial value.
Tangible assets can include property, precious metals, and a growing choice amongst investors is whisky. Bottle collecting has grown into a target for investors, and now cask whisky has too.
So, why should you invest in tangible assets, and in particular – why should you invest in cask whisky?
Here are three reasons why cask whisky can be a savvy investment choice for the coming year.
1 – Tangible assets like whisky can hold up even when financial markets are struggling.
Supply and demand is, as with any investment, still a key consideration, but alternative assets tend to exist in cycles that don’t always follow other financial markets.
Periods of economic uncertainty can make them more attractive and boost their prices, and demand for certain goods will still react to the broader financial landscape, but over time fluctuations are usually far shallower than volatile financial markets.
Cask whisky stands out amongst many other investments, however, because its value is equally tied up within the process of barrel aging. Whisky in its cask matures over time, and becomes more valuable as it does. This is not the case for bottles, as maturation only takes place in the cask. That means that regardless of overall market values, a cask of whisky will increase in value over time as the product becomes more desirable in itself.
A tangible asset such as cask whisky can complement a series of shorter term financial investments like a stock portfolio, or can exist on its own to provide returns later down the line.
That doesn’t mean it’s without risks, particularly as a product that is perishable. But, with the right storage, risk is almost completely eliminated – which brings us to our second reason as to why cask whisky is a great alternative asset.
2 – Cask whisky storage is all taken care of for you.
One of the biggest disadvantages of tangible assets is storage – unlike stocks and shares which only exist in a digital format, these real life assets need to be kept safe and well looked after.
Compared to a bottle gathering dust in a drinks cabinet, cask whisky is stored in secure bonded warehouses. Whisky is a significant part of the Scottish economy, and because duty is suspended on the whisky whilst in the warehouse, HMRC have it in their best interests to ensure the product is well looked after until it leaves.
Strict safety and storage measures are in place, and people are on hand to keep an eye on your cask. We are able to arrange your cask to be re-gauged in order to check the amount of liquid, and the ABV (alcohol by volume). This means you can keep track of the natural evaporation, give you a chance to change the cask, and understand when the best time to sell the contents will be.
3 – Cask whisky is great for enthusiasts, or anyone looking for something exciting to invest in.
The lure of tangible assets is often the asset themselves. If whisky is something you’re already interested in, or maybe you’ve begun bottle collection, then cask whisky can be a great next step.
With cask investment, whilst you can opt for a more traditional hands-off option, you can also become more involved in the process. You can play a part in deciding the outcome – where you sell the cask, or even if you want to bottle your own. Through the process you can even have the chance to sample your whisky as it matures. Alongside this, investing in cask whisky gives you the opportunity to explore a key part of Scottish heritage. Learn more about the whisky regions (blog link), or the history of the ‘water of life’ (link) that has become such a key part of the economy and landscape of Scotland.
There are many reasons why whisky cask investment makes a great alternative asset for 2022. If you are interested in learning more about casks, or wondering whether this may be a good fit for your portfolio – just get in touch.
We are always happy to offer advice and insight, with years of experience in both finance and whisky to share. We know that cask investment may not be the right decision for everyone, so feel free to book a call to learn more about what MacInnes can offer.
Get Started by Downloading Our Guide
Read through your copy of the MacInnes whisky investment guide and learn more about the market and the whisky investment process.