Why whiskey barrels might be a better investment than you think Business News

Seasoned whiskey expert Jass Patel of Tomoka Casks explains how investors can safely enjoy investing in whiskey on tap.

If a friend told you he made a 4,600% return on a few whiskey casks, you’d probably think he got a few too many, or got ripped off. But it really happened when bank manager Roger Parfitt made a return of £ 220,000 on a pair of casks he bought in the 1990s.

In 1994 Mr Parfitt bought a cask of Macallan single malt for £ 3,200 and a cask of Tobermory for £ 1,500. Although not an expert in whiskey, Mr Parfitt expected the casks to rise in value over the years and hopefully generate some extra cash to add to his fund of. retirement. To his surprise, he successfully sold the casks earlier this year for £ 225,000.

He now plans to pay off his mortgage and retire three years ahead of schedule. He also announced that he would buy a barrel for his two children whom he nicknamed “Mom and Dad’s barrel”, in the hopes of generating a good return to help finance their future.

“For me personally, when it comes to investing, it has to be a smart strategy,” he said. Time. “I believe if you do what everyone else is doing you will never get a result like this. The fact that it’s duty free… you can prove it by the clues, and Scotch whiskey never goes out of fashion. I think this is a good alternative strategy.

While the yields of 4,700% are exceptional and investments in whiskey are unlikely to help you retire early, the key principle to keep in mind is that whiskey casks appreciate naturally. with time. As a general rule, the longer a whiskey has aged in cask, the higher its price can be. That’s why we pay a lot more for an 18-year-old Macallan than a Macallan 12. If it’s a Macallan 25 you’re after, you’ll get a four-figure price.

With Mr. Parfitt’s story comes the caveat that most investors will see much smaller returns. The vast majority of casks are unlikely to appreciate as much as those from the legendary The Macallan distillery in Moray. Investors would do well to approach the barrel market with a fair amount of skepticism. You may have heard scary stories of whiskey cask scams offering sky-high returns that did not materialize afterwards. As with any investment, it’s critical to make sure you understand what you’re paying for and avoid anyone promising get-rich-quick schemes.

Whiskey prices are determined by age as well as the reputation of the distillery, the rarity of a particular bottle or cask, and the opinions of leading industry tasters, such as Whiskey Defender or whiskey critic Jim Murray. Investors can expect average annual returns of around 8-10%, with the BC20 Cask Index averaging 13.09% over the past five years. Older whiskeys from the best distilleries such as The Macallan sell for particularly high prices and enjoy a cult following among collectors around the world.

It is important to remember that whiskey is an asset backed investment, which means that once you have purchased your cask you will still have access to the whiskey it contains which you can sell or bottle when. you want.

Another hidden benefit is that Mr Parfitt’s £ 200,000 windfall will not be subject to any capital gains tax. Since the HMRC classifies whiskey as a “wasting asset” with a limited shelf life, the CGT does not apply to profits made on whiskey casks. This is a nice advantage over other investment options, allowing you to maximize your overall returns across your entire investment portfolio.

Where some whiskey investment companies are taking off is as part of a strong and profitable exit strategy. Be aware that selling your keg to a private buyer or blender is unlikely to generate a healthy profit, especially if you own any keg with no real provenance or if you paid above the market rate first. place. That’s why Tomoka Casks offers a fully managed service right up to bottling. We also have a retail arm that sells fine spirits directly to consumers, providing a ready-made way out for our cask investors.

Transparency is essential in the management of your investments. We work with each of our investors to create an exit strategy that’s right for you. This includes the initial disclosure of all the costs involved, such as VAT and customs duties, so that you have a clear and realistic expectation of your eventual profit.

For whiskey enthusiasts such as Mr Parfitt, the casks also allow you to get involved in the industry and bottle your own whiskey. “I remember thinking that if it doesn’t value, the worst that can happen is you have to take it out of the warehouse, bottle it and drink it.” Along with a solid investment strategy, investing in your own cask could make you the proud owner of your own whiskey label.

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