Scotch vs. Stocks

A New York City entrepreneur is capitalizing on the thin line between indulgence and investment. David Clelland and a group of partners are launching 1494, a private membership club that will act as the link between whisky distilleries and collectors, and serve as a whisky curator for its distinguished clientele.

Clelland plans to open a clubhouse in Midtown Manhattan this year: a cornerstone of his vision of a private membership club "for the procurement, enjoyment, and appreciation of whisky." Single malt Scotch, that is.

Single malt Scotch whisky, Clelland said, "is the purest, most valuable, and most collectable form of any whisky." For the past century, production has been overseen by the Scottish Parliament, which sets uniform standards to "ensure the highest-quality product that lives within Scottish distilling traditions."

By fiat of Scottish Parliament, a true single malt scotch whisky is born of malted barley, distilled in a pot still, entirely produced at a single distillery, and aged for at least three years in an oak barrel no larger than 700 liters.

Some people find it as good as gold, Clelland said -- and he's betting they will be willing to invest big money to buy and enjoy rare bottles.

A lifetime membership in 1494 is $175,000. Just don't wait too long to buy one. Only six of the 10 founders' memberships are still available. Annual memberships range from $15,000 to $25,000.

Don't scoff. While most investors have been pleased to get single-digit returns in the past three years, the value of a vintage Maccallan 1938 or a Dallmore 1936 has appreciated by more than 400%, according to The World Whisky Index.

That, of course, isn't the norm. The brewery and the brand are among the most important factors that regulate the price of a bottle, and as with any investment, there is no guarantee that one "limited edition" whisky will turn out to be liquid gold.

A prized bottle of Scotch starts at $1,000 to $1,500 -- and can sometimes soar to a value of $500,000 or more.

Michael Kappen, a former banker who started the World Whisky Index, expects whisky investments to return annual yields at around 12%. And unlike wine, whisky does not age once it’s bottled, so it can serve as a great long-term investment. Unless you drink it, of course.

But Clelland is a realist. "I'm a Scotchman. I can't tell people don't drink your whisky," he told me.

And while drinking a bottle of rare whisky obviously eliminates one investment, it actually buoys the prices of surviving bottles of the same type.

In the past 20 years or so, single malt Scotch whisky has become a niche alternative investment, especially in Japan and large parts of Europe. Now Russia, India, and China are increasing demand, and the values of (exclusive) single malt whiskies are climbing.

That's why Clelland thinks the time is right for an exclusive club. In addition to securing a lease on the clubhouse, he's been creating tasting and collecting opportunities and procuring whiskies for existing members and for the 1494 house collection.

The most significant win to date was the Black Bowmore and the Macallan 50-year-old Anniversary Malt at a Bonham’s auction in New York earlier this summer, he said. The Black Bowmore is an extremely rare bottling: matured for 43 years and released in 2007. The Macallan 50-year-old Anniversary Malt, distilled in 1928 and bottled in 1983, "set the hallmark for whiskies at auction through the last several decades," Clelland said.

So ask yourself a question: To drink -- or invest? What do you want to do with your Scotch?