If you invest in high value assets or premium property you have probably heard of Knight Frank. If you have an interest in whisky investment and you’ve read somewhere about fabled 582% returns on some kind of whisky investment, then you may also be aware that those figures are based on data from the Knight Frank Luxury Investment Index (KFLII).
While the whisky portion of the KFLII is interesting, its use in general whisky investment is somewhat limited by the scope of what it covers. Unfortunately it is also often misquoted with the intention to mislead.
The Knight Frank Wealth Report and Luxury Investment Index
The Knight Frank Wealth Report is released annually around March, it summarises and analyses the past 12 months of investments, especially house prices, but also other “investments of passion” that constitute the KFLII.
The KFLII is a weighted index that is currently made up of 11 different luxury investments of passion. An annual summary of the performance of the KFLII is released each year as part of Knight Frank’s Wealth Report. The assets that contribute to the KFLII are regularly reviewed for suitability. For example whisky was introduced in the 2019 report (which looks at 2018 data) handbags joined in 2020 and stamps were dropped in 2021.
It is important to note that the Knight Frank Rare Whisky Index looks at the 100 rarest and most expensive bottles in the world. That means the index represents a biassed sample of an already super niche part of the market.
Examining the performance of whisky in the Knight Frank report can be interesting, but it is only really relevant for collectors and investors who want to look at the past performance of a micro-view of the market. Even then it needs to be used with caution and understanding.
The Limitations of Index’s
As whisky investment has become more widespread, so too has the interest in and need for analysis of the market and how it has changed. While the Knight Frank Rare Whisky Index receives a lot of press, it is just one of the indexes available on the market, and it is important to understand its limitations—and the limitations of all indexes.
An index is a sample of the market that is used to act as an indicator of performance. They can be representative of a whole market, or a section of it. But they are still just a representation.
The 2024 Wealth Report shows the ten year performance for ultra rare and ultra expensive whisky dropped to 280% and the 12 month performance dropped to -9%, that’s compared to 373% and 3% respectively in 2023. However if you start to dig down into that data you can start to see further variations, as discussed by Andy Simpson the report:
“The worst performing 50 bottles lost 26% of their combined value, the remaining 50 bottles gained 5%, with the 20 best performers increasing by a respectable 20%.”
That means hypothetically if you owned one bottle you may have gained between 5% and 20%, or lost 26%. However, if you owned all 100, on average you would have lost 9%. But only compared to the 2023 values. If you bought all 100 bottles in 2013 you would have made 280%.
Even the use of single bottle indexes have limitations as they are looking at the average result of all sales. It is just as important to understand where, and when, to sell a bottle in order to get the best return.
Our expertise allows us to make educated suggestions for you and your individual aims. We use data to analyse and predict, but we are not simply reacting to what is doing well now. We also use our experience and understanding of the market to search for what has the potential to do well in the future.
When Not To Use The Knight Frank Index
It is important to be clear that the Knight Frank Luxury Investment Index very specifically looks at ultra rare bottles of whisky. Any mention of this index in relation to casks is strictly misleading and goes against the 2024 legislation released by the ASA governing the advertisement of whisky cask investments.
Using the historic returns of a sample of ultra rare, ultra high value bottles of whisky to indicate the potential for casks of whisky is akin to using the value of house prices in central London to sell bricks. The latter can increase in value when used correctly, they can even be used to make the former, but bricks alone do not create a multi-million pound property.
If you think you would benefit from our unique expertise and understanding of the market then please get in touch.