My Best and Possibly Worst Investment – Alternative Assets

​Back in 2017 I learned about the rapid rise in popularity of Japanese whisky, more specifically Yamazaki. Here is a little history lesson about the company’s background and meteoric rise to popularity:

Yamazaki became Japan’s first whisky distillery in 1923. Japanese whisky was still barely a blip on the map until in 2012 Yamazaki 25 won the “Best Single Malt” award at the World Whisky awards and then in 2015, both Yamazaki 18 and Yamazaki 25 won the coveted “Double Gold Metal Award” at the San Francisco World Spirits Competition. Before, much of the single malt whisky market was dominated by the Scotch with well-known names such as Macallan and Highland Park.

Suddenly, everyone was clamoring to get their hands on a bottle of Yamazaki, so much so that Yamazaki decided to discontinue the Yamazaki 25, which got its name from the fact that it is aged in sherry casks for 25 years. They simply could not produce enough supply and wait 25 years to reap the profits given the newfound demand and began to focus more on their no-age-statement whiskeys that are still great but do not require such extensive ageing. To no surprise, the price of Yamazaki products have skyrocketed on the secondary market in part riding the tailwinds of Chinese consumerism and exuberance as the Chinese have driven up the price by hoarding the expensive golden ichor. You used to be able to buy a bottle of Yamazaki 25 from the distillery for just a couple hundred dollars, now it costs a cool $10,000 on Dekanta which is one of the largest retailers of Japanese whisky online.
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​The price has just gone up over the years for as people drink their bottles, supply is reduced as there is no more Yamazaki 25 coming from the distillery to supplement the market – but demand hasn’t waned.

Back in 2017 I realized the supply crunch would soon ensue for the Yamazaki 18 as Suntory (who owns Yamazaki) begins to focus its efforts on producing lower margin but higher volume products to attempt to quell demand and capitalize on their popularity.

As a result, I spent time researching online and one day found a boutique liquor store in New York that was selling bottles of Yamazaki 18 for just $400 (actually $360 since I used a coupon) when the going price for a bottle on the open market was about $600!

I immediately bought out their whole stock of 3 bottles.

At the time, I was home in Charleston and they did not offer out of state delivery so I shipped the bottles to my uncle in New York who then shipped them down to me in Charleston on a bus.
As it turns out, this was my best investment ever! Since then, the price of a bottle of Yamazaki 18 has risen to about $1,000. Garnering me a nice return of 277% or compounded annual growth rate of 41%, far exceeding the growth rate of my other traditional investments.

Now I am hoping Suntory decides to discontinue the Yamazaki 18 which if history holds true, should make the value of my bottles go through the roof.

The Yamazaki 12 was actually the first Japanese whisky to win gold at the International Spirits Challenge in 2003. I found this price chart for a Yamazaki 12 showing the whisky boom that occurred in 2018, where at today’s rates, 12,000 Yen equals $112 and 21,000 Yen equals about $197.

Prices have since consolidated and a bottle now trades for about $177 according to Wine-Searcher. If you are interested in getting into the whisky market, this might be a good place to start, especially if you think one day Suntory might discontinue Yamazaki 12.

​While I boast that purchasing these bottles were my best investment as it is incredibly difficult nowadays to get your hands on a bottle for a good price, I realize one day it may turn out that purchasing these bottles may turn into one of my worst investments from a book value standpoint.

Why? Well, being an alternative asset which is defined as an investment that does not conform to the traditional asset classes of stock, bond, or certificate like works of art, fine wine, or real estate, there is no open exchange that provides seemingly instant liquidity. If I want to sell a building, a Van Gough, or one of my coveted bottles of Yamazaki, I would most likely have to list or auction my asset and wait until I find the perfect buyer that will value the asset as much or more than I do to purchase it. Furthermore, there are liquor control laws meaning that I would need a liquor license to sell my bottle on an open marketplace.

In the future I still may be able to sell them as a collectible in a private party person-to-person transaction but to be completely honest, I never plan to sell my bottles. I have actually already gifted one away to a family friend has helped out my family tremendously, and will probably break open my remaining bottles to mark extremely special occasions such as the day my kids graduate. In this way, I will never be able to reap the true market value of my bottles, but that is simply because I do not want to.

However, I still implore you to look into investing in alternative assets to diversify as famed economist and Nobel Prize winner Harry Markowitz called diversification “the only free lunch in finance.” Alternative assets may exhibit low liquidity, especially in troubled times where you might have to let assets go at fire sale prices, but because of these factors, they often generate higher expected returns and offer portfolio protection being that they are often less correlated with capital markets.

As of now, I know that I have sunk $1,080 into three bottles of Yamazaki 18 that one day may be worth $430,000 (such as this bottle of Yamazaki 50-year-old). Regardless, in the meantime they sure do look pretty in my collection!
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