The Key Benefits of Whisky Ownership and Potential Risks to Consider (2024)

If you are wanting to build your finances and secure your future, diversification is one of the keys to success. While traditional assets like stocks and bonds have long dominated portfolios, alternative investments have gained more popularity in recent years. Whisky, a well-loved spirit with a rich history, has emerged as a unique and profitable investment avenue in the past decade.

A tangible, consumable asset, that’s also culturally significant, Scotch whisky offers numerous benefits that make it an enticing option for investors. In this article, we delve into the benefits that come with whisky investment, ranging from portfolio diversification and attractive returns, to tax-efficiency and the supply and demand nature of the market. At Hackstons, transparency and authenticity are among our core values, and so we also share some of the key risks to consider as well as some ways to mitigate these risks.

THE RISKS to CONSIDER

Scams

As with any asset ownership market, and in fact many markets outside of asset ownership, whisky is not immune to fraudulent activities. Unfortunately, in any market, unscrupulous individuals may attempt to sell counterfeit or non-existent bottles or casks, exploiting the enthusiasm and trust of potential investors. As such, it is essential to exercise caution when dealing with unfamiliar sellers or investment opportunities.

When looking for companies that can facilitate whisky ownership, we recommend being as thorough as possible with your due diligence so that you can be confident that you’re working with a trusted and established company, helping to mitigate the risk of falling victim to scams.

Value of cask/whisky diminishing

While the whisky market has shown significant growth, it is essential to recognise that the value or returns of each whisky cask is never guaranteed. Factors such as brand reputation, rarity, age, the type of finish and demand all influence the potential for value appreciation. Economic conditions and changing consumer preferences can also impact the market dynamics, leading to fluctuations in whisky values. With this being said, as a general rule of thumb, whisky which is held for long periods of time, that also does not fall below a minimum ABV of 40%, will always have a value and usually more than what was originally paid.

Damage or theft

Physical assets, such as whisky casks or bottles, are of course more susceptible to damage or theft than more nebulous assets such as stocks and shares. Fire, water damage, or improper storage conditions can lead to a significant loss of investment value. Additionally, theft poses a risk, as rare and valuable whiskies can be attractive targets for criminals.

While all whisky casks need to be stored in a HMRC-bonded warehouse, the insurance for these facilities usually only protects the structure of the building itself, and not its contents. As such, If you’re looking to own whisky, you should ensure proper insurance coverage for your casks. At Hackstons, We offer an extensive and bespoke insurance policy to all our cask owners. Our policy covers fire, theft and damage and your cask is insured to its current value, rather than the purchase price, providing you with top of the range capital security.

Whisky ABV dropping below the accepted standard

Whisky ageing involves the evaporation of alcohol known as the "angel's share." Over time, the ABV (alcohol by volume) of the spirit can drop below the required minimum for classification as whisky. While some degree of ABV reduction is expected (around 2% each year) and contributes to the complexity of aged whisky, excessive evaporation can diminish the product's quality and value.

Once Scotch drops below 40% ABV, it is no longer considered Scotch whisky, and so you should stay informed about the ABV levels of your cask to ensure that it doesn’t drop below 40% ABV. We recommend checking the ABV level of your cask every 3-5 years for younger casks, and every 2-3 years for casks that are older. This is known as regauging your cask, and is a service that clients can request from us at Hackstons.

Having covered the potential risks to consider around whisky ownership, let’s now delve into the multiple benefits that come with owning a tangible, liquid asset such as whisky.