Whisky investors turn pastimes into profit
- Whisky expected to generate returns of 41% over next 10 years and engenders the most satisfaction regarding performance over the long term
- Investors using personal interests to make portfolios more enjoyable
Whisky investors are the most satisfied out of all individuals that invest in their hobbies and interests, a recent study by Lloyds Private Banking has revealed.
Investing in whisky can be a highly profitable investment option. Since 2008, the value of rare whisky, measured by the Rare Whisky 101 Apex 1000 index has risen by 361.09%* and, due to this, the majority of investors are satisfied with the performance in the last year (88%), with satisfaction growing over the long term (94% over ten years). Looking to the future, over the next decade, whisky investments are expected to yield a return of 41%.
In 2015, rare whisky enjoyed a record year at auction, outperforming other investments such as wine and gold. The leading index for scotch whisky, the Rare Whisky Apex 1000, rose by 14.36% for the full year in 2015, outperforming wine, which fell by 0.42%, gold, which declined by 10.44%, and many of the world’s leading equity indices.
One in six UK investors holds collective investments in their portfolios, with 3% investing in whisky. The study has shown that investors are willing to part with large sums of money to invest in what they love. On average, £27,700 is the most spent on a single whisky investment, with a third spending more than £50,000 on an individual item
However, investors who don’t have tens of thousands to spend on an alternative investment are finding that investing in their hobby doesn’t need to break the bank. 25 percent of investors spend less than £1,000 on hobby investments in general, demonstrating that there needn’t be a high cost barrier to investors diversifying their portfolios.
Passion vs profit
The majority of hobby investments are driven by an investor’s personal interest for the asset class – this is especially the case for whisky, where 44% of owners link their investment to personal sentiment. A further 13% say they choose to invest to build a personal collection and 19% for purely financial reasons. Other high value asset classes predominately driven by personal interest are art (53%) and antiques (50%). For those who do invest in one of these classes, alternative investments make up 18% of their portfolios on average.
Markus Stadlmann, CIO, Lloyds Private Banking says: “In investment terms, work and play do not need to be mutually exclusive, and with the right investment approach it is possible to make your interests pay.
“Often tangible assets, such as whisky, retain their value and are not eroded by inflation. Over the long-term, these types of assets do not closely correlate with more traditional equity and bond markets, and therefore offer diversification opportunities. Investing in something you enjoy is a great way to make your portfolio unique to you.”
Andy Simpson, co-founder of Rare Whisky 101, said:
“The growth of the secondary market for rare single malt whisky, both in terms of volume and value, has exceeded all expectations. While the sustainability of these volume increases could be called into question, we know for certain that the true rarities will only become rarer. Should demand for these rare treasures continue on its current trajectory, as is fully expected, Scotch’s credentials as a viable passion investment asset class continue to look particularly attractive evidenced in 2016 with the Rare Whisky 101 Apex 1000 up by 26.09% year to date.
Where next for investors?
Alternative investments are expected to see more inflows over the next ten years. The study found that whisky will attract significant amounts in the future (1 year: £5,700, 5 years: £8,600, 10 years: £9,300).
The largest investments will continue to go towards classic cars (1 year: £16,500, 5 years: £21,700, 10 years: £21,400), while watches are the interest investment that will see the biggest increase in spending over the next decade (1 year: £12,100, 5 years: £17,500, 10 years: £19,900).
Investors in fine wine are expecting the strongest level of return in the long term (48%) whilst classic cars are predicted to perform better in the medium term at 41%.
“Investing in what you love is not a new phenomenon. Savvy investors have always looked to profit from personal interests. However, it is vital to remember that you are dealing with predominately private markets. It is therefore highly important that before you invest in your favourite whisky, car, watch or wine, you do your research. From the start you must be clear on your motivation behind the investment. You must also consider all costs, including: purchase, restoration, storage, upkeep, and insurance. And be sure that items have all valid documentation, to ensure that you give yourself the best chance to make your pastime pay.”