Yahoo Finance 3 Reasons Whiskey Is the Money-Making Alternative Investment of the Ultra-Wealthy You May Not Have Considered
As a hedge against inflation, more high-net-worth individuals are seeking alternative investments. These might range from standards like real estate to the unique and eclectic, such as genuine Scotch whisky aged barrels in Scotland.
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“Inflation, although it’s getting better, is still a pretty major concern around the world,” said Taylor Costa van Putten, co-president at Braeburn Whisky, a global team of whisky cask investment specialists.
In this environment, real assets, commodities, and premium and luxury goods tend to appreciate, even as the stock market and other investments may fluctuate.
So why are people investing in Scotch whisky — and how can you do it?
1. Commodities Do Well During Inflation
“The reason why Scotch whisky has always done well, and it’s done extraordinarily well in the last couple of years with the inflationary environment, is because it’s a premium asset. It’s very real, it’s very tangible, but it’s also a commodity,” Costa van Putten said. “It’s made of three essential ingredients: water, barley, and energy, another commodity.”
As costs for these commodities go up — as they do in an inflationary environment — the value of whisky rises. “In the last couple of years, the barrel market has seen rather consistent, stable appreciation as is expected for the long term for an industrial asset,” Costa van Putten said.
2. Whiskey Can Preserve Generational Wealth
Costa van Putten told us that there are barrels of Scotch whisky on the planet right now that have outlived their original owners. Typically, bottles of whisky aged 50+ years may sell for hundreds of thousands of dollars. “That means the barrels themselves are worth many millions of dollars,” he said. “People can and do use this as a succession plan.”
He said that some people may purchase a barrel when a child is born and then pass the barrel onto the child to pay for college or a first home when they get married. In the latter case, the investor may also bottle some of the whisky for wedding favors or as a gift to the bride and groom.
“It’s been used to transfer wealth for generations in Scotland,” Costa van Putten said.
3. People Like (To Drink) Whiskey
Costa van Putten told us that whisky enthusiasts often seek to invest as part of a diversified portfolio. But knowledge of whisky or enjoyment of the spirit is optional to reap the rewards.
“Half of the people that come to us are big-time whisky guys and gals,” Costa van Putten said. The other half, however, are just looking for a solid investment with attractive returns unrelated to the stock market or other financial markets.
Some investors also seek to bottle the spirits and sell them individually, although this is rare. “We do occasionally work with folks who have outlets for bottles,” Costa van Putten said. “We [also] occasionally work with people who want a special bottling for their kids’ wedding or their 50th birthday or 30th work anniversary or something.”
In cases like this, what’s remaining in the barrel after the bottling would be sold for a profit on the market. “But the vast majority of people want all the profits in their pockets,” Costa van Putten said.
How To Invest in Whiskey
When you invest in barrels of whiskey, it’s similar to investing in massive quantities of gold, which you would store off-site rather than in your home. “Consider our Scottish warehouse to be the Fort Knox of Whisky,” Costa van Putten agreed on an exclusive Zoom call with GOBankingRates from the New York City Braeburn Whisky headquarters.
Investors will purchase barrels of whisky, wait for them to age in the Scotland facility and, ultimately, sell it for a profit. “The barrel is just like any other investment or asset that you own and sell,” he said.
Entry Point for Investors
However, investing in whisky is not for everyone. First, you must be an accredited investor to purchase whisky casks, Costa van Putten pointed out. Based on federal requirements from the Securities and Exchange Commission (SEC), that means you have a net worth of at least $1 million and income greater than $200,000 or $300,000 combined with a spouse or partner.
You’ll need to be willing to spend at least $50,000 to purchase a barrel, Costa van Putten told GOBankingRates.
Best Candidates for Whisky Investments
“People tend to come to us because they’ve already built the foundation of their house and, now, they really need help diversifying,” Costa van Putten said.
Ideally, you should be comfortable investing in tangibles and illiquid assets with a holding period of at least five to 10 years and, typically, even longer than that.
“Scotch whisky is a rather stable industrial asset,” Costa van Putten said. “So, it’s not so much of a risk of loss of principle. It’s just more about the illiquid nature of the asset… It’s really only appropriate for folks that are in a place where, financially, they can sock something away for five to 10-plus years and be perfectly okay with that.”
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This article originally appeared on GOBankingRates.com: 3 Reasons Whiskey Is the Money-Making Alternative Investment of the Ultra-Wealthy You May Not Have Considered
