Alternative investment has become increasingly sought-after among high-net-worth individuals (HNWIs) as they seek better investment returns amid heightened market volatility and a sustained low interest-rate environment.
Asia’s HNWIs are moving away from their long-held focus on property, according to a recent East & Partners Asia survey.
The survey interviewed an executive from each of the top 100 corporates in the region.
Their alternative allocation rose to 15.1 percent of their total portfolio on average from 8 percent three years ago.
In Hong Kong, for instance, scotch whisky investment has been gaining traction as an alternative investment since 2014.
As a result, the investment grade scotch index, which tracks auction prices, has soared 340 percent from 2008 to 2014, beating other traditional assets.
Currently, there are five types of scotch whisky — Scotland, Ireland, Bourbon, Canada and Japan.
Skyrocketing prices have attracted savvy investors to jump into the whisky market.
Branco Wong Kwok-lung, general manager of Chinese-edition Whisky Magazine, said he has spent HK$400,000 (US$51,560) in whisky investment since he ventured into the market two years ago.
It now accounts for 10 to 20 percent of his portfolio as an alternative investment. He plans to add more on a yearly basis.
It’s not easy to find yield in the current sluggish economy. Whisky offers diversified investment, Wong said.
Also, the limited stock of rare whisky has made it resilient amid the ups and downs in the macro environment.
Whisky prices have been stable with limited downside risk.
Investors can test the market with a minimum investment of several thousand dollars. They can get a rough idea about which distilleries produce investment-grade whisky.
Limited liquidity is a major risk, so investors should be aware that there might be a good price but no sales.
And they should be able to hold the investment.
Whisky trading has no open market and there is no fair price to refer to.
Instead, auction houses and foreign market prices are the main references, Wong said.
That means investors should have a medium-term investment horizon.
There are exceptions.
The Japanese Karuizawa whisky has surged 10 times within a few years after the distillery closed in 2011.
In most cases, investors could expect a certain return after holding the investment for two to three years, Wong said.
He paid about HK$10,000 on a whisky through a foreign agent and the price has risen 50 percent.
The most favored labels are Macallan and Ardbeg, which are age-labeled whisky from the 1970s or earlier.
Also, products by defunct distillers like Bora, Springbank, Port Ellen, Hanyu and Karuizawa offer good investment value.
Wong currently holds Karuizawa gold Geisha whisky and Port Ellen label whisky in his collection, which has a market price of around HK$200,000 to HK$300,000.
Pricier labels such as special edition Macallan this year already fetches a market price of US$30,000 and 50-year-old vintage Bowmore whisky can be auctioned at tens of thousands of dollars.
Japanese whisky has been gaining traction in recent years.
Hanyu whisky is one of the most sought-after labels. It launched the limited edition “Joker cards” series with 54 best single cask.
The distillery offered 122 bottles worldwide. Each set costs at least HK$2 million.
It’s reported that there are only six people in the world who have collected the whole set of 54.
The world’s most expensive whisky, the six-liter Macallan M Decanter, was auctioned for US$628,000 two years ago.
This article appears in the Hong Kong Private Banking Journal on Nov. 16.
Translation by Julie Zhu
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