The Risks of Investing in Whisky.

Don’t believe everything that’s written.

This advert from The Whisky Corporation in Hong Kong crossed my desk last week.

Glenfarclas Pagoda Trilogy

Like most of these things, they’re generally read then discarded; however on this occasion something really stood out. “The top 100 Single Malts yield returns in excess of 66% P/A since 2008 – Source CNN Money 2015”.

Wow! No-one told me… How come I missed that?

Rare Whisky 101 produces the indices which show how whisky has performed as an investment and the top 100 bottles haven’t increased by 66% per year since 2008. If that were the case, an index starting at 100 would, at the end of 2014, look like this –

Percent Increase Error

The Apex100 (the top 100 bottles, which you can see here) started at 100 points in 2008 and now stands at 597.26, a 497.26% increase since the end of 2008…. That’s almost a quarter of what’s being advertised here?

Searching around CNN I found this (http://money.cnn.com/2014/11/20/investing/whiskey-investing/) which I can only assume has been misinterpreted on the Whisky Corporation advert. What CNN actually say is this “Since the first whiskey index was formed six years ago, top single malts have risen in value by more than 660%”. That was factually correct, just at the end of November 2013 and for the top 10 bottles NOT the top 100. At the end of November 2013 the top 100 index was up 374.98%…. not 1,160% as would be the case here if a 66% annual increase were evident.

Whisky Highland (the company which grew into RW101) provided insight and information to Global Spirit Merchants (the previous company to The Whisky Corporation) in 2013. That data provision ceased in November 2013… So, being the founder of Whisky Highland, it was easy enough to go back though the records to see what was going on. Was I going mad? Had Whisky Highland provided the wrong information?

What was provided was information on the top 10, top 50 and top 100 performing bottles. The top 100 bottles (as at the end of Nov 2013) had increased by 374.98%. That equates to around 30.25% growth year on year to the end of 2013. Less than half what is actually being stated on the above advert.

CNN would appear to have been provided with data (not by Whisky Highland or Rare Whisky 101) for the top 10, rather than the top 100, which, at the end of November 2013 had increased by 662.01%.

Using incorrect data like this is, in my opinion, exceptionally dangerous. Readers frequently believe whatever’s written, especially if it appears to be endorsed by the likes of CNN.

Being concerned that RW101’s data was either being misinterpreted or misused, I had a more thorough look through The Whisky Corporation’s website. The following indices were of interest –

Whisky Corp Indices

Firstly, without exception, anyone who I’ve ever dealt with who (to a significant level) invests in whisky, or plans to, are intelligent, educated, curious collector-investors. The old adage – a fool and their money are easily parted – couldn’t be further from the truth… anyone who can afford to spend c£10k, £50k, £100k, £250k plus on whisky as an investment/collectable hasn’t made that kind of money by being a fool… nor would they easily give it away. So I find it hard to believe anyone would part with c£20,000 for three bottles of Scotch as an investment based on data which is almost two years out of date?  Each index finishes at the end of July 2013. I can only assume these bottles are being specifically sold as an investment as there’s no marketing around the quality of the liquid which you’d assume there would be if these were aimed at drinkers.

Each one of the above indices has also had the physical values multiplied by 10. The ‘Signature Portfolio’ (which I named the rather less catchy ‘High Value Bottle Index’) is a collection of 11 of the rarest bottles in existence (including the likes of the Macallan 1928, Balvenie 1937, Ardbeg 1965, Port Ellen Queen’s Visit). The starting value of the bottles was £25,200, not as is incorrectly stated £252,000. The value in July 2013 was £67,460 not £674,600. As a ‘Signature Portfolio’, I’d like to see anyone get hold of ten Macallan 1928’s, ten Balvenie 1937’s and ten Port Ellen Queen’s visit bottles.

The same applies to the other indices – For info and accuracy, divide the stated £ amounts by ten and that’s the correct value for each index start/finish.

Why highlight this?

Not because I think there’s anything malicious going on, not because I’m in any way shape or form accusing The Whisky Corporation of anything wrong (everyone makes errors in the rounding), it’s purely to highlight unfortunately not everything reported/advertised is correct. Especially in an unregulated market like whisky where there are many new collectors/investors in the category.

And as to the Glenfarclas Pagoda Trilogy for a cool £20,000. I think we can be sure these are cracking drams, but as an investment? As always, time will tell…

Caveat Emptor … Let Buyer Beware!

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