Investments in whisky casks – risk factors
Investment risk is an inherent feature of every investment. It does not always have to be understood in a negative way - in the language of investors, "risk" only means that the investment will achieve a different result than expected - including a better one. However, a more intuitive understanding of this concept means the possibility of a worse financial result of the investment. A sensible investor needs to know the investment risk factors and how they can be minimized.
One of the best ways to reduce investment risk is portfolio diversification, which we recently wrote in the entry - How to build an effective and crisis-resistant investment portfolio?.
In the following text, we will focus on specific risk factors that should be considered when investing in Scotch whisky casks, and explain how Stilnovisti customers are protected from them.
Decrease in liquidity of assets
Low asset liquidity is a very big challenge for most alternative assets. Scotch whisky is unique in this matter, however, because the casks are in most cases not a finished product, but a quality ingredient of blended whisky, which accounts for the majority of production in Scotland.
All available data indicate that the supply of Scotch whisky is not keeping pace with the growing demand. In 2019, Scotch whisky exports reached record levels, both in volume and value. The Scotch Whisky Association, citing the HM Revenue & Customs (HMRC) data, said Scottish exports reached £ 4.9 billion last year, an increase of 4.4% compared to 2018. Meanwhile, quantitatively sent abroad, the equivalent of 1.3 billion whisky bottles with a capacity of 0.7 cl, which is an increase of 2.4% compared to the previous year. Investors from Asia have an undoubted impact on the market - according to SWA, sales to Taiwan, India and Japan last year increased by 22, 16 and 19.7% respectively.
Despite the growing number of distilleries and the plans of many whisky producers to increase production, experts say this trend is not endangered in the long run.
Theft or destruction of a cask
In order for whisky to be called "Scotch" (and thus maintain its high value), the entire process of maturation and bottling must take place in Scotland. This means that, despite having full ownership of the cask, you cannot take it home with you, and it must be stored in warehouses in Scotland.
Stilnovisti customers can, however, be calm about their assets - our casks are stored in specially adapted warehouses, in the best conditions possible to maturate the drink.
Most importantly, the casks are insured against theft, damage or fire. So Stilnovisti customers can be sure that in the event of any unfortunate event their losses will be covered by the insurer.
Termination of the Stilnovisti business
One of the questions most frequently asked by Stilnovisti clients is the question of what will happen to their investment in case the company ceases to exist before the investment is completed.
The answer to is very simple - because by investing with Stilnovisti, the customer becomes the sole owner of specific casks. Property rights are confirmed by sales documents. And that i show the investors have the full right to dispose of their casks without the support of Stilnovisti. They can sell them at any time, and the growing global demand for Scotch whisky will certainly facilitate the liquidation of assets.
Asymmetry of information
The Scotch whisky market is a hermetic market with reduced information requirements and transparency. There are a number of factors that determine the value and investment potential of a cask, and their recognition and assessment requires experience and considerable knowledge in this field. When investing with Stilnovisti, you don't need to be an expert to make a profitable investment in whisky casks.
Stilnovisti is one of the largest company in Europe that invests in alcohol, including casks of Scotch whisky. We have been operating on the market since 2006 and we have several years of experience in managing our clients' portfolios, thanks to which we are able to analyze macroeconomic and market situations and accurately place funds at the best time.
When choosing barrels for our clients, we are also supported by the Investment Committee consisting of the greatest authorities in the whisky industry. It is how we can be sure that the assets selected for our clients are the best possible choice, guaranteeing the highest possible rate of return.
