Shot at investing in Whiskey

Leper

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I'm not the best of investors having been burnt by Eircom and AIB shares in the past. But, yesterday one of my former work colleagues advised me to invest in a "barrel"* or cask of craft whiskey. His return todate has been between 10% and !2% (per annum, I assume). I have no problem about how to invest. It's a case of paying up and hope you've done wisely. I assume this is whiskey being distilled/made and not the finished product.

But, my colleague advised he received an "income tax clawback" of circa €2000 recently as a result of his whiskey investment. Can anybody explain this apparent nice little earner of a tax refund to me in simple terms and without financial jargon?

*equivalent of 497 bottles of whiskey.

Any other information on the risks of investing in whiskey would be welcome too.
 

PebbleBeach2020

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perhaps your first port (no pun intended!) should be to your friend. It sounds a bit "too good to be true" from the above. Why would you get an income tax clawback of 2000 for buying a cask of whiskey and subsequently making a 10% to 12% return on investment. At those rates, I don't think it's per annum.
 

RedOnion

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Any other information on the risks of investing in whiskey would be welcome too.
There have been good returns in the past.
But, you're familiar with the expression "buying a pig in a poke"?

My concern would be the current push of it as an amazing investment opportunity where the risks aren't clearly called out. The insurance costs alone are significant.

The following is an interesting take from a distillery that does not offer cask purchases so it might be biased in the other direction!


I have looked into it, but as a hobby interest rather than an investment. Some distillerys offer a 'club' type programme, where you can ultimately bottle your own whiskey at the end.
 

odyssey06

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I remember getting a circular about Nephin whiskey who were setting up in Mayo, to invest in them under an EIIS scheme, not sure if that was for a cask or not...
I was just reading though said company is the courts involving a Director falling out and need for new investment.
 

Steven Barrett

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I remember getting a circular about Nephin whiskey who were setting up in Mayo, to invest in them under an EIIS scheme, not sure if that was for a cask or not...
I was just reading though said company is the courts involving a Director falling out and need for new investment.
That's what my thoughts were when he said he got tax back.

As for the return, you have to think about risk and return and what is the rest of the market doing. Investing in an Irish whiskey distillery is investing in a very small company in Ireland. There is a huge risk that you won't get your money back. So how does that 10% - 12% per annum compare to investing it elsewhere? The MSCI and S&P 500 have both given better returns over the last 10 years with an annualised return of 14.48% and 17.79% respectively. Even over the last 5 years the MSCI World has returned 12.86% per annum and the S&P 500 has returned 15.66%.

If I was investing in such a high risk investment, I would want the potential to make over 20% per annum to make it worth my while.


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Steven
www.bluewaterfp.ie
 

joe sod

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Aswell as that you have to take into account the increased regulation of the alcohol industry and the possible ban on advertising like what happened the tobacco industry. If governments were to ban alcohol advertising how would a new brand of whiskey get off the ground ?
Already some of the big breweries are being abandoned by "ethical investment" funds because they are now regarded as Sin stocks, although the "ethical investment" trend could turn out to be another bubble
 

Leper

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perhaps your first port (no pun intended!) should be to your friend. It sounds a bit "too good to be true" from the above. Why would you get an income tax clawback of 2000 for buying a cask of whiskey and subsequently making a 10% to 12% return on investment. At those rates, I don't think it's per annum.
That's some of the reasons I posted here. I have no doubt that the investment is legitimate, but it's the tax clawback I still cannot understand even in a minute way. The distillery involved is based in Co Cork.

I reckon there's no question of me marketing Leper Whiskey and the option is there to sell at any time preferably before the end product is ready. I have checked out the distillery's website and everything appears above board. Or perhaps it's that I'm financially naive.
 
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Steven Barrett

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Aswell as that you have to take into account the increased regulation of the alcohol industry and the possible ban on advertising like what happened the tobacco industry. If governments were to ban alcohol advertising how would a new brand of whiskey get off the ground ?
Already some of the big breweries are being abandoned by "ethical investment" funds because they are now regarded as Sin stocks, although the "ethical investment" trend could turn out to be another bubble
They're not ethical investments, they are ESG investments. It is totally different and many of the big companies held in a typical index are held in ESG funds. There is EU regulations in place for fund managers and those giving advice to consider sustainability when recommending investments. It will be adopted more in the future, not less.

Steven
Bluewaterfp.ie
 

joe sod

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They're not ethical investments, they are ESG investments. It is totally different and many of the big companies held in a typical index are held in ESG funds.
fair enough, yes Environmental Social and Governance funds, whats the difference? in any case I doubt ESG funds would be including whiskey distilleries in their portfolio when they are now abandoning mainstream breweries ?
 

noproblem

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That's some of the reasons I posted here. I have no doubt that the investment is legitimate, but it's the tax clawback I still cannot understand even in a minute way. The distillery involved is based in Co Cork.

I reckon there's no question of me marketing Leper Whiskey and the option is there to sell at any time preferably before the end product is ready. I have checked out the distillery's website and everything appears above board. Or perhaps it's that I'm financially naive.
I might well be wrong Leper, but I believe the "whiskey brand" you're thinking of investing in, and the people involved in it, might well have history in getting people to put their money into other investments they launched that went pear shaped. No names being mentioned here but you probable know what I'm talking about :confused:
 

Steven Barrett

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fair enough, yes Environmental Social and Governance funds, whats the difference? in any case I doubt ESG funds would be including whiskey distilleries in their portfolio when they are now abandoning mainstream breweries ?
It's quiet a significant difference. You should read up on it, ESG will become the norm.

Unless the whiskey portfolio is a massive company, it won't be in any fund managers portfolio. The one the OP is talking about is probably out of a small unit in an industrial estate somewhere.
 

Leper

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1. I'm still none the wiser regarding the tax clawback aspect of my post. Why would an investor get such a refund? What amount is refundable? How is it calculated?
2. Steven Barrett (above) informed me he would want 20% return on such an investment such is the risk involved. The refund of tax would be in addition to this. I'd take 10% per annum gladly.
3. Noproblem posted that the people propagating the investment were involved in loss making investments in the past. Perhaps it's my naivité but I do not know the names of the people involved.
4. I visit my local bookies most days and usually do not write a docket (I do a fun bet or two every four weeks or so). If nothing else, I get a free read of the Racing Post. But, I'm not adverse to gambling a couple of grand on whiskey. The possibility of Leper Single Malt Oak Barrel brand being launched appeals to my occasional humorous tendencies though.
 

RedOnion

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1. I'm still none the wiser regarding the tax clawback aspect of my post. Why would an investor get such a refund? What amount is refundable? How is it calculated?
It's unlikely that most of your 'buy a cask' schemes would provide a tax rebate.

However, some distillerys have availed of the EIIS scheme. But these are usually a loan to the distillery secured against company shares, and I'm not aware of an example that also gives you 'ownership' of a cask. But there might be one structured like that.

If you search for 'EIIS distillery' you'll find plenty of examples.

4. I visit my local bookies most days and usually do not write a docket (I do a fun bet or two every four weeks or so). If nothing else, I get a free read of the Racing Post. But, I'm not adverse to gambling a couple of grand on whiskey. The possibility of Leper Single Malt Oak Barrel brand being launched appeals to my occasional humorous tendencies though.
Its extremely expensive. I've the full costs somewhere, but by the time you pay warehousing and insurance, then excise duty, cost of bottles and bottling, you could buy a very very nice known single malt for the same money. I might still do it, but you need your eyes open.
 

Gordon Gekko

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It sounds like EIIS where the person got a cask as part of the commercial deal.

But who knows based on second and third hand information?
 

Steven Barrett

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1. I'm still none the wiser regarding the tax clawback aspect of my post. Why would an investor get such a refund? What amount is refundable? How is it calculated?
2. Steven Barrett (above) informed me he would want 20% return on such an investment such is the risk involved. The refund of tax would be in addition to this. I'd take 10% per annum gladly.
3. Noproblem posted that the people propagating the investment were involved in loss making investments in the past. Perhaps it's my naivité but I do not know the names of the people involved.
4. I visit my local bookies most days and usually do not write a docket (I do a fun bet or two every four weeks or so). If nothing else, I get a free read of the Racing Post. But, I'm not adverse to gambling a couple of grand on whiskey. The possibility of Leper Single Malt Oak Barrel brand being launched appeals to my occasional humorous tendencies though.
ok, you are looking at the tax relief as an additional return on this investment. But it is also available on all other EIIS. A lot of stockbrokers run EIIS every year. They assess all the applications that come in to them and create a fund, spreading the risk across a number of small to medium size business, reducing your overall risk, thereby increasing the chance that you get your money back and more. And you get tax relief on your contribution too.


Steven
www.bluewaterfp.ie
 

RedOnion

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@Leper

As a hobby, not an investment.

My spreadsheet is difficult to understand, but if you look at the following and scroll down you'll see the approximate costs of buying a cask and bottling yourself on maturity. This is just one option, and there are alternatives, but it gives an idea of all the costs involved.

 

Leper

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Thanks you all for your informative posts. Steven Barrett went to some trouble in posting, again special thanks. Red Onion also went to some trouble supports hobby rather than investment. But, when all is considered I think the whiskey/whisky I bring back from our travels abroad exceed value as far as investment is concerned. But, you never know . . . one day you could come across a few bottles of Leper Single Malt (Triple Distilled) and perhaps some of us on AAM could share them along with the angels on Celtic Whiskey Cask Sales.
 

Paul O Mahoney

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Thanks you all for your informative posts. Steven Barrett went to some trouble in posting, again special thanks. Red Onion also went to some trouble supports hobby rather than investment. But, when all is considered I think the whiskey/whisky I bring back from our travels abroad exceed value as far as investment is concerned. But, you never know . . . one day you could come across a few bottles of Leper Single Malt (Triple Distilled) and perhaps some of us on AAM could share them along with the angels on Celtic Whiskey Cask Sales.
"Leper Single Malt, a drink that genuinely affects your body parts" there's one marketing slogan.
 
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