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Liquid Assets: Is Scotch The New Wine?

THIS OCTOBER Macallan hosted a party at the Bowery Hotel in Manhattan to celebrate the release of 1,000 bottles from its Annie Leibovitz Scotch collection. Prices start at $2,750 and each bottle comes with a limited-edition Leibovitz print. Marketing gimmick? Maybe–but just part of The Macallan’s bid as a category leader to elevate “investment-grade Scotch” (or ‘IGS’ as some already abbreviate it) to the same lofty plane as high-end art and wine.

It’s working: Some 11,000 bottles have already sold at auction in 2012, up 550% over 2008, according to Scottish tracking firm Whisky Highland. The overall market, just $5 million annually, would barely fit into a snifter (that’s 4% of what Leon Black reportedly paid for Edvard Munch’s “The Scream”), but an index fund of the top 250 bottles delivered 206% from Q3 2008 to Q3 2012, says Whisky Highland founder Andy Simpson. The top 1,000 were up 107%.

That’s not to say it’s a sure thing. Simpson keeps track of the worst performing bottles too.  And those returns are as ugly as the best performing returns are beautiful.

So Simpson has some basic advice. Don’t get into this game unless you love whisky. And use it as a diversification strategy. Do not put all your eggs in this caramel-colored basket.

New advisory firms are eager to help investors hit the bottle. This summer saw the opening of 1494,New York‘s priciest whisky club. Founder David Clelland firmly believes, outwardly, in the value of the culture and history of scotch, but the real selling point for the $25,000 “collector’s” membership at 1494 is the consultation, curation, purchasing and storage service. But you can always buy in at the more modestly priced connoisseur level — $15,000.

The best sign the market is getting hotter? Counterfeiters. There are whispers of scoundrels moving between high-end bars and hotels, collecting fancy bottles and filling them with younger  product, or even tea, with the hopes of selling off the result to hapless investors. But older whiskies can be carbon-dated, Simpson says, thanks to midcentury nuclear tests–seriously–that irradiated casks. No radiation? It’s older than 1950. High levels? It’s from 1950 to 1963. Middling? It’s post-JFK.

Prices for good bottles will likely go up, says 1494 founder David Clelland, because of a fixed supply (or shrinking, due to imbibing) and expanding buyer’s pool, especially in China and India. (Clelland is preparing indexes for 1494 that will track high-value bottles globally; while scotch whiskies are still your best bet, whiskies from Ireland, Japan and the US are slowly entering play.)

And if the rare-whisky market should collapse? Just drink your losses. Try that with a social media stock.

Here are some of the highest-netting scotch sales at auction:

The Macallan 64 Year Old in Lalique: $460,000

The Dalmore 64 Trinitas: $160,100

The Macallan 1926 Fine and Rare: $75,000

Glenfiddich 1937: $71,700

The Dalmore 62 Single Highland Malt Scotch: $58,000