Why luxury ?
This theme is driven by several deep-set trends.
- Global wealth creation
Global wealth creation should make more people rich, or simply richer. Their purchasing power will be less dependent on economic circumstances, which will maintain a certain level of spending in the luxury sector.
- Emerging markets’ potential
Global growth has opened numerous countries to luxury consumption and the liberalisation of communist or former communist countries such as Russia and China has led to an increase in luxury good consumers. In this respect, China has become a central market for the luxury sector. The growing middle class in emerging countries is eager to buy premium brands. Generally speaking, new consumers want to exhibit their newly acquired social status. Luxury provides means to achieve a need for distinction, an ability to satisfy one’s desires, and a willingness to show off one’s means.
- Development of tourism
The structural development of tourism, with a +3-4% increase in travelers per year, is another strong driver for the luxury theme as tourism accounts for close to 50% of luxury good purchases in Europe.
- Growing influence of Millennials
Lastly, luxury is undergoing several structural shifts in consumer behaviors and expectations, linked to the growing influence of Millennials (18-35 year-old) who embody new lifestyles. This generation is looking for new experiences rather than buying traditional luxury goods, and driving digitisation into becoming a necessary transition for luxury brands.
Our definition of luxury goods is based on the following requirements: quality, craftsmanship, design, service, exclusivity and brand heritage. While luxury goods are non-essential purchases, owning them leads to pleasure and satisfaction: that of possessing and exhibiting.
As a result, luxury companies benefit from a strong pricing power, as consumers are willing to pay a significant premium for their products.
The companies we invest in have a premium or luxury positioning and a strong brand reputation. We favour a selective approach, ensuring that such companies rely on strong fundamentals (capacity to innovate, brand image, robust balance sheets, etc.) which should result in a higher earnings growth than that of global markets.
The investment universe includes more than a hundred stocks and has a broad coverage, from traditional luxury sectors (perfume & cosmetics, watchmaking & jewelry, Haute Couture & ready-to-wear clothes, leather crafts & accessories) to other sectors such as premium automobile, leisure (premium hotels and restaurants), sportswear brands, spirits, etc.
Past performances are not a reliable indicator of future performances of the funds and of the funds manager.