Whisky asset manager Scotch Whisky Investments until recently focused mainly on private investors. That market continues as usual, but bringing in former ABN Amro director Eran Habets as CEO means more focus on selling to independent asset managers and family offices. And abroad, first and foremost Belgium.
When stepping into the offices of Scotch Whisky Investments (SWI), the bottles of single malt Scotch glisten at you in all shades of gold. Abundantly displayed side by side and one above the other, this home-bottled whisky, numbered and numbered to match the right investing customer to it.
Investing in whisky captures the imagination, and so does the location of SWI›s headquarters. Every wall in the Dutch Sassenheim headquarters near The Hague is papered with effigies of whisky bottles, the sinks house old whisky barrels and SWI›s great pride is a veritable whisky museum.
Locked display cases house the collection of whisky bottles carefully collected over sixty years by the now-deceased Italian Valentino Zagatti. He wanted to put the euros he had left over from quitting smoking in his teens to use wisely. SWI took over the collection in 2017; Zagetti still witnessed the opening. The showpiece: the oldest single malt whisky from 1843.
The museum is not open to randomly interested parties; the Sassenheim-based firm would have a day job to do that. However, it is open to investing customers, wealthy individuals who can invest from 100,000 euro in whisky, for up to 10 per cent of their freely investable assets.
Whisky vault with 100,000 bottles
SWI manages towards €300 million in whisky for customers and has been operating under a licence granted by the AFM since 2014. This is not done through funds: a customer owns his whisky portfolio himself. The portfolio is filled with scarce bottles and (parts of) casks of whisky of varying ages and distilleries.
«We only invest in investment grade whisky,» explains Habets, who joined SWI as ceo earlier this year. While «sitting on» a whisky vault with 100,000 bottles of exotic whisky of which outliers are worth three tonnes, he explains why whisky would suit family offices and asset managers. Something he also sees concretely in the inflow figures.
«The average bank client has a relatively short investment horizon, the more professional clients who are guided by a family office have larger assets and a longer horizon. Those types of clients are switching to alternatives, including real assets such as whisky, for part of their portfolio. Wealthy families find it logical to invest directly in private equity or real estate, rather than funds filled with them. The same applies to whisky.»
Scotch Whisky Investments will therefore seek out these clients more explicitly. A logical development, «not a step change,» says Habets. «Moreover, we are not going to invest very differently, only the fact that we are going to actively approach the market is new. The company has grown and matured. We now monitor and control the entire whisky chain, except for the distillation part. We do our own acquisition ourselves, manage the stock, manage the portfolio. Being able to invest well in whisky starts with being able to buy well. Good whisky is scarce. You need a network for that - apart from knowledge and experience.»
The firm therefore made a very conscious decision to provide the industry with storage, via the acquisition of its own bonded warehouse in Scotland two years ago, with the scarcity in that area. Habets: «Being able to let top whiskies sit in cask longer, on balance the whole industry benefits from that. That has improved our contacts.»
Indeed, whisky casks remain in Scotland for tax and duty reasons, bottles largely just the same. The plan, therefore, is to build and open more warehouses in the coming years and make our position in the industry even better. «These are steps we are accelerating,» Habets said. The company will soon have two warehouses completed. The aim is to eventually have 28.
Doubling assets under management
For completeness, Habets and head of marketing Thomas van Gameren say that customers are guaranteed a bottle when investing in a barrel of whisky. «Everything we have is insured at market value. Should something happen to the whisky in a cask, a customer will get a similar bottle. Annually, our analysts check all our cask whisky to assess whether a cask can still be left, the whisky should be bottled or transferred to another cask.»
Is this way of investing also suitable for large institutional parties? Habets: «With a family office, we can easily cope. But in the case of a pension fund, you are not talking about an investment of 100 million euros. Last year, Scotland exported £6.2 billion worth of whisky, only a small part of which was investment grade. That’s a limitation. So no, we are not really in the institutional realm.»
So SWI cleary is active in the realm of family offices and independent asset managers. Habets: «They are increasingly in demand for alternative investments and real assets. Whisky returns are positive, with a 373 per cent rise in rare whisky bottles over the past decade, according to the Knight Frank Rare Whisky index. Moreover, correlation with other asset classes is low. Real assets make sense; wine and whisky are the most accessible within them. By the way: at most a quarter of our clients have a thing for whisky themselves, the rest don’t know anything about it and do it purely to improve their risk-adjusted returns.»
So there is no shortage of interest; Habets can easily fill his week with family offices and asset managers wanting to talk to him. Mostly they come from the Netherlands, but Hong Kong, London and Zurich are no exception. «We are initially focusing on the Dutch and Belgian markets, are also opening an office in Antwerp at the end of this year.»
Where is the dot on the horizon? Without wanting to get too concrete, Habets dares the ambition of doubling the currently managed assets. «In five years time. That is realistic. With the inflow accelerating every year, our growth in other countries and our increased activity in the professional market.»