Can introducing whisky into a portfolio of traditional investments increase the portfolio’s risk-weighted return?

Abstract

This dissertation investigates the potential impact of including whisky in investment portfolios alongside traditional asset classes for South African investors. It is the first study to analyse whisky returns, associated risks, and volatility, culminating in the creation of a composite whisky index for performance comparison. The research spans from 2014 to 2024 and evaluates various asset classes, including local and international equities, bonds, property, foreign exchange, commodities, and collectables. Findings reveal that whisky returns were superior up to 2022, primarily driven by reports on rare and exclusive whiskies, which are often inaccessible to average investors. Although the performance of these rare whiskies has since slowed, the Composite 18 whisky index has shown resilience and improvement over the past three years. The analysis further indicates that while whisky exhibits higher volatility than some peers, it maintains a low correlation with traditional assets. This suggests that whisky can be an effective diversification tool, potentially enhancing South African investors' risk-weighted returns. The research concludes that incorporating whisky into investment strategies may provide a valuable hedge against market fluctuations and contribute positively to portfolio performance.