As we previewed back in September, investing in 2015 turned out to be very difficult from a broad-asset-class perspective:

Our perpetual challenge is to create a portfolio of investments from an array of asset classes that works to deliver superior risk-adjusted performance over the long-term to meet the investment goals of our client base. While a one-year time frame is very short, the fact that all asset class returns were so meager, with many outright negative, is crazy and made our challenge much tougher than normal. We cannot recall a time period when short-term performance has been this poor. According to data from Societe Generale, an investment bank, these minimal asset-class gains in 2015 make it the worst year for finding returns since 1937!

Playing Monday morning quarterback with a "woulda/coulda/shoulda" review of our investment decisions is a big part of our investment process. In that review, we identified one asset class that could have really boosted returns in 2015...and, for some of us, it was right in front of our face…

Scotch!

The broadest, most comprehensive index for Scotch whiskey — the Rare Whisky Apex 1000 Index — was up over 14% in 2015. While this was a bit lower than its performance in 2014 (up 16%), it slaughtered its competition in other asset classes as shown above. Rare Whisky 101, a consultancy that compiles a range of indices on the secondary market for Scotch, publishes an annual report on Scotch with a full performance attribution (Rare Whisky Collectors/Investors 2015 Single Malt Scotch Review is a must-read for all Scotch aficionados). Despite "ever increasing supply" last year, Rare Whisky feels 2015 "should be viewed as another exceptional year for Scotch."

Though certain members of the investment team at Sequoia are tempted to formally initiate a large allocation to cases of Port Ellen, Bowmore, Lagavulin, and our go-to favorite, Maccallan, in client portfolios, our Investment Committee most likely would not endorse such a move. Taking Rare Whisky 101's advice: "the inexperienced investor risks pocket-punishing losses should the wrong bottles be bought." (But how could Bowmore be wrong?!)

As all Scotch experts understand, one of primary factors for determining the value of rare Scotch is the age of the bottle (the other being the vintage). Similarly, the primary factor for determining the value of an investor's long-term portfolio is time invested in the market (typically, the longer, the better). While no one can predict which Scotch will outperform best in any one year, nor can any investor predict which asset class will outperform.

Diversification — in both Scotch bottle collecting and investing — can be paramount.

 

...

POSTSCRIPT - This is a good reminder to revisit the stock of Diageo plc, the world's largest producer of Scotch in the world and owner of some of our favorite brands!

This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product.  The opinions expressed do not necessarily reflect those of author and are subject to change without notice. Past performance is not indicative of future results. Diversification cannot assure profit or guarantee against loss. There is

no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.Reference to an index does not imply that a portfolio will achieve return, volatility, or other results similar to an index. Performance of an index is not illustrative of any account, portfolio or strategy managed by Sequoia Financial Group. It is not possible to invest directly in an index.

 

The views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.

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Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.

On Scotch & Asset Class Returns | Sequoia Financial Group

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