The world’s first private equity fund investing in premium single malt whisky, known as the Platinum Whisky Investment Fund, has raised US$4 million and likely to reach its goal of US$10 million by June 2014, the fund’s scheduled launch period.
“A lot more interest is still being discussed with potential investors. We are on track to close the US$10 million target by June or potentially a little earlier,” says Rickesh Kishnani, one of the partners of the fund.
The close-ended fund, launched in March 2014 with a minimum subscription of US$250,000, is being administered by Sinopac Solutions & Services. The fund is a structured private equity investment vehicle with a seven-year maturity and a projected return of 15% per annum.
Its goal is to invest heavily in physical stocks of premium single malt whisky and take a strong niche position by capitalizing on the huge gap between supply and demand for fine aged whisky, on the back of an unanticipated strong demand from global investors, collectors and connoisseurs, particularly in Asia.
“What’s unique at this particular point in time for the whisky market is simply that the amount of aged whisky that was put aside back in the 1980s and early 1990s isn’t enough to satisfy the demand in Asia and other parts of the world. Nobody saw the growth in the industry that we have today,” Kishnani points out.
Singapore, for example, is ranked third by volume among the top 20 export markets for scotch whiskey in 2013, according to data from the Scotch Whisky Association (SWA). It also ranked as the third scotch whisky export market by value in 2013.
Other Asian markets that ranked in the top 20 in terms of export market by value for scotch whisky last year are: Taiwan (7th), India (14th) and Japan (18th).
Asian countries, meantime, in the top 20 export markets by volume for scotch whisky in 2013 are India (4th), South Korea (12th), Thailand (13th), Taiwan (16th) and China (19th).
Rising alternative investment
Working with Kishnani is David Robertson, the fund’s chief investment officer, who has 20 years’ experience in the industry and is a former master distiller at The Macallan and previously rare whisky director at The Dalmore.
Robertson, who has long-standing relationships with renowned distilleries, private collectors and suppliers, will be in charge of sourcing the premium single malt whisky that the fund will invest and trade in.
“Production of aged whisky takes time and current demand is outstripping supply, especially in Asia. The Platinum Whisky Investment Fund will acquire large parcels of premium whiskies at below market prices to take a strong niche position in the market,” Robertson explains.
Kishnani, who has strong relationships with distributors and a solid experience in servicing high net worth individuals, will be in charge of the sale and trade of the whisky.
The stock of single malt whisky purchased by the Fund will be kept in a third party warehouse in Scotland and covered with insurance. A third party auditor will conduct stock checks every six months which will be reported to another third party auditor in charge of valuation and audit work.
Although relatively small for a private equity fund, Kishnani and Roberts note that based on the availability of stocks in the whisky market, the portfolio is just the right size. “We estimate right now US$10 million is what we feel comfortable we’ll be able to purchase. Beyond that, there’s not much out there,” Kishnani says.
Annual sales of single malt scotch whisky increased from US$390 million to US$1.1 billion in the past 10 years driven by the relative scarcity of the premium, vintage product, according to SWA. Investment Grade Scotch (IGS) indices produced by the Whisky Highland UK show that in the last three years, sales of the top 1,000 single malts were up 130%, the top 250 single malts up 200% and the top 100 single malts up 230%.
Premium whisky is a collectible asset with value appreciation primarily due to its rarity. It is part of a growing trend towards collectibles as an alternative investment class. Collectible investments have performed well versus most traditional asset classes in 2008-2013. Purely as an investment, premium whisky has significantly outperformed other collectibles including art, rare stamps, rare coins and fine wine.
Whisky is non-perishable and does not age in the bottle, therefore its price remains relatively stable and it is easier to store than wine. Single malt whisky is produced only at one distillery, made exclusively from malted barley, and aged a minimum of three years in oak casks.
