Being able to make an investment that gives you pleasure, not just the potential for a return, is what many new entrants into the world of cask whisky are looking for. It sounds like the perfect combination of fun and finance, assuming everything plays out as intended, but there are some cautionary tales out there. Scams, lack of foresight, and poorly structured portfolios are all ways in which things can go awry.
Our goal is to help you make the smart, informed decisions at the beginning of your journey that will allow you to maximise the quality of your position. Of course, as with every investment, there are never any guarantees, but there is a due diligence framework that you can build on.
Do you understand the true nature of the risk profile?
This is a question that some of us might feel is taking the fun out of making an investment in something we are passionate about, and yet it remains the most important question there is. “Anyone who says to you that the market is completely guaranteed is an extreme red flag,” says Alphie Valentine, Co-founder of Hackstons, whisky specialists who provide opportunities for both investment and consumption.
The point is that you first have to accept that there will never be a 100% guarantee of a return, as certain factors will always be beyond your control, and this is true not just for whisky but for any type of investment. Understanding this means that you can remain pragmatic and grounded in the real world. From there, you will be able to work through the due diligence process.
Can you prove ownership and fully verify the asset?
A Delivery Order is the document needed to do this, and without one, you will not be able to do so. Every reputable business in the whisky industry will think nothing of providing you with one, which means that if one is not forthcoming, or appears to be incomplete, something is amiss.
Scammers know that whisky enthusiasts can be led with their hearts rather than their heads if they get them really excited about the journey, and they may try to exploit this. Taking a step back and thinking about a potential whisky investment like it were any other asset is important. You wouldn’t accept anything less than watertight proof of ownership when buying commercial real estate, so why risk settling for less just because you’re passionate about the whisky you’re looking to invest in?
Are the people offering the opportunity fully transparent?
You only have to look at the public profile of a respected business, such as when Hackstons recently won Newcomer of the Year, to see that they are not just great at what they do, but are always willing to put a name to a face. Being able to meet in-person, ask questions and receive answers, and discuss options without feeling like you are being constantly sold something is essential. You want to know that the people you are going to be dealing with have your best interests at heart and are there to make sure that you get all of the information required to make an informed decision.
Is there an option to come and visit the storage facility?
Seeing your assets with your own eyes and getting to know about how they are stored and handled is both interesting, if you have a passion for whisky, and essential if you are an investor. Upfront, honest, and open professionals with years of combined experience will think nothing of arranging a visit for you. If, on the other hand, you find that the contact you have been dealing with up to that point becomes evasive when you ask for a visit, this is a clear sign that all may not be as it seems.
Are you making sure to keep your passion in check?
Being excited about a new opportunity is great, but you should never let this excitement rule your decision-making; you could end up in a below-par position. Once again, due diligence is as much about stepping back and slowing things down as it is diving into the details. Giving yourself time and space to perform an analysis at a pace that you feel comfortable with is what will allow you to make an informed decision.
Sanity Check: Where did you first hear about the opportunity?
Last but by no means least, always consider where you heard about the opportunity. Being referred by a friend or coming across a brochure or online guide from a respected name is one thing, but being approached personally via phone or email by someone you have never heard of before is another.
Work through each of these steps while assessing each opportunity, and you will be able to avoid offers that are simply too good to be true. There are never any guarantees in the world of investments, but performing these steps will ensure that you can maximise the quality of your position.