Luxury goods have a long way to go, is your portfolio ready?

luxury goods (at market value) 1.2 trillion dollars850 billion, led by luxury cars and personal luxury goods) Has increased by 6% per year in the last 20 yearshowever, With the pandemic, his income fell 20%, returning to 2015 levels.

it is expected that Asia and especially China market by the year 2025grows at a rapid rate of 8.5% per annum, this is due to the increase in the middle classIn which 2 citizens are involved per second only between China and India. middle class ie main consumer And, for example, in India it will be 50% to 80% of the total population by 2030.

For him By 2025, half of young luxury consumers will be Chineseled by Generation Z and Y which is more than 50% market share, They will redefine the purpose of operations and actors, which should emphasize diversity, inclusion and sustainability. This also canal online triple your sales (up to 30% of total luxury sales) and where local business will be strengthened.

Following a -19.5% decline in the MSCI Europe Textile Apparel & Luxury Goods Index (MSCI Lux) index in 2022 (-11.7% for EuroStoxx 50 or -15.06% for MSCI Europe), The area offers an attractive investment opportunity, However, one should be careful with the values ​​chosen as the same index has gained 31.82% so far this year and is trading at a PER of 30.03x (versus MSCI Europe’s 15.18%). , however over 12 months it is up 25.5% due to earnings growth expectations.

But, now that Asian tourists are traveling again, it is worth taking advantage of the potential to return to pre-pandemic levels. Also, the recovery of tourism, which was 40% of the market at the end of December, was only 18% because of Covid-19 fears. But there are expectations that it will gradually recover to 33% in the next 5 years.

So you still have a way to go! Is your portfolio ready?

If we want to invest in companies in the luxury sector, we can buy shares of any leading company in the stock market. But We can invest in these companies indirectly, investing in funds and ETFs in a more diversified and effective manner that replicates some index, either MSCI or S&P Global Luxury Index, Which is made up of the 80 largest publicly traded companies that are involved in the production or distribution of luxury goods or the provision of luxury services that meet specific marketing needs.

As we’ll see below, there are some options that stand out not only for their profitability, but also for their expenses and volatility:

between These are the two ETFs that hold the first position for profitability in 2023, one from Invesco and the other from BlackRock, with very similar volatility between them, although Invesco’s standing in the longer term, which also has lower current expenses. on the other hand Amundi’s ETF However, ranked last for profitability in the year Shows some stability in both 3 year annualized and 5 year returnsWho? Much lower volatility and a higher Sharpe than the previous ones (synonymous with better returns relative to the amount of risk you are taking on the investment), and slightly higher expenses than the Invesco ETF.

On the other hand, actively managed funds attract our attention Pictet Premium Brands and Frank Muller Luxury Fund, the two strategies with the highest Sharpe ratio by risk level. Furthermore, Pictet is a house that is characterized by the age of its thematic funds, in this case, this fund was launched in 2005 and has assets of approximately €2,400 million. For its part, Frank Müller’s fund is much smaller -82 million euros- and is 8 years old. Both funds have a clear growth style, although the second invests in companies with smaller market capitalizations.

The key differences in the portfolios of both the funds are evident:

  • Pictet’s fund has exposure to the financial sector, while Frank Muller does not.
  • Franck Muller has a high risk towards Defensive Consumption.
  • While Pictet’s 10 largest positions represent 44% of assets, Mueller’s 10 largest positions represent 52%. In a first, it featured 3 hotels in its top 10, as well as two financial companies (Visa and American Express).
  • Among the 10 largest that repeated in both funds: Compagnie Financier Richemont, L’Oréal, LVMH and Ferrari.


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