The Cayman-registered private equity fund has raised a total of $12m from 50 private investors globally.
Half of the investors came from Hong Kong, Rickesh Kishnani, CEO and manager of the fund, told FSA. The rest are spread across mainland China, Singapore, Taiwan, the US and Canada. He added that the investors are high net worth individuals and a few family offices.
The fund makes money by acquiring large parcels of premium whiskies at below market prices, according to its fund factsheet. It focuses on rare, ultra premium and vintage single-malt whiskies.
It then actively trades its stocks of whiskies, which are sold at auctions or directly to affluent collectors, connoisseurs, hotels and clubs. It has a management fee of 1.5% and a performance fee of 20%, according to the fund factsheet.
The fund’s management team enjoys an insider status in the whisky industry and has direct access to source global brands such as The Macallan, The Dalmore, Glenfiddich, Bowmore and Ardbeg, the factsheet said.
To date, $9m has been invested into a collection of around 14,000 rare bottles of whisky, which are being stored in an independent bonded storage facility in Scotland. The remaining $3m will be deployed over the next 12 months, according to the statement.
Whisky as portfolio diversifier
According to the statement, the fund sold $1.5m retail value of rare whisky in Hong Kong over the past year to private clients, luxury retail, auctions and food and beverage outlets and fine whisky bars at a net profit for investors of 65%.
When asked about the risks in investing in whisky, Kishnani said that global economic conditions would affect any asset class, though he did not elaborate.
"There is, however, no correlation between whisky and any other asset class so it gives investors a good diversification option."
The main fundamentals for whisky are supply and demand. "They simply didn't put enough single malt whisky into barrels for long-term aging back in the 1990s. This has led to a lack of supply of old age and rare single malt whisky right at the same time demand has been growing," Kishnani said.
The Rare Whisky Apex 1000 Index, which represents a broad picture of the performance of a basket of collectable bottles of Scotch whisky, has outperformed other asset classes such as gold and the FTSE 100 Index, as well as others in the drinks industry such as the Liv-Ex Fine Wine 100 Index.
Source: Rare Whisky 101
“Single malt whisky is not just a luxury good and a collector’s item, but also an investable alternative asset with good potential returns,” Kishnani said in the statement.
The fund’s portfolio has appreciated in value over the years, David Robertson, the fund’s Edinburgh-based chief investment officer, said in the statement. Of particular interest to collectors for their rarity are the fund’s holdings in "silent stills" − Japanese malts and bottles of vintage whisky distilled in the 1930s-1950s.
To monetise its investment portfolios over the next four years, the fund signed an exclusive distribution agreement with Quintessentially, a luxury concierge service founded in London in 2000.
Apart from being the fund’s CEO, Kishnani is the Asia-Pacific managing director for wine and spirits at Quintessentially.
Kishnani does not plan to launch another whisky or similar fund.
"But family offices and asset management groups have contacted us to their express interest [in another fund]," he said.