There are 23 companies in the fund, and its prospectus says firms must have a market cap of at least $100 million and meet minimum standards in terms of liquidity and length of time listed. Companies are divided into core and non-core companies. Core companies have a whiskey distillery and produce alcoholic beverages. They are weighted at a minimum of 85% of the index. Non-core firms are luxury-goods companies with at least $500 million in annual whiskey and spirits sale. Soft-drink companies involved in whiskey distribution or that derive the majority of their revenues from the provision of mixers, are also part of the ETF.
The largest holding by weight is Diageo Plc, at 24.21%, as of late September.
Nicholas M. Pollacchi, chief executive officer of The Whisky Dog, who for 12 years has helped people acquire rare whiskey for private tastings and collections, agrees there’s “massive demand” for whiskey, especially in the past 10 years.
Not only has that demand inspired the new ETF, but it also motivated one hedge fund to start up a fund that collects rare bottles—the Platinum Whisky Investment Fund.
Pollacchi says many investors are drawn by the rise in single-bottle prices over the past few years. For example, Balvenie Tun 1401 Batch 1, a limited edition whiskey that originally sold for $350 a few years ago, now can sell for $1,500 to $2,000.
But Pollacchi said there’s a difference between investing in whiskey the product and a drinks company. While there are some well-run companies like Pernod Richard and Brown Forman, both which are in the ETF, others are struggling, he says. And he adds many of these companies hold other names besides whiskey in their beverage portfolios. Some of the brands sell well, some don’t.
“It’s not like I can just invest in Johnnie Walker,” he said.
But Bolton says the diversification of the fund is one of its strengths. “If interest in whiskey goes down, other spirits like vodka and gin can offset that,” he says.
Investing in whiskey itself is much like buying art or vintage cars, Pollacchi says. Just because a bottle of 10-year old Macallan (owned by the privately held company Erdington) might fetch double or triple the price in a few years, demand for whiskey varies not only by the distillery but also by individual bottles themselves. Stocks may not see the same sort of growth potential as select bottles.
“Investing into whiskey is a passion-driven investment . . . When we build private whiskey collections, we do it in a way to not only let them grow in value, but so you can build a collection you want, rather than say I have a lot of whiskey somewhere and hopefully someday it will pay off,” Pollacchi says. "To me that removes that passion."