THE MONEY MAKING EXPERT
well the company is managed will also determine how a luxury company performs in a downturn.’
Rob Burgeman believes that luxury brands will only succeed if they maintain an air of exclusivity. The worst thing they can do in a recession is cheapen their brand by selling bargain branded items to drive sales.
‘The key for all of these companies is an understanding of how to maintain and enhance a portfolio of brands and products, while protecting, enhancing and premiumising their offering,’ he says.
‘In turn their goods become aspirational and desirable amongst a wealthier clientele, especially in the emerging world.’
He cites the Burberry baseball caps that were so popular in the early 2000s as a case in point. The brand had to pull them after they became associated with football hooligans. Customers will only pay a luxury price tag if they believe the product they are buying remains exclusive.
Emma-Lou Montgomery, an associate director at asset manager Fidelity International, says that Mulberry appears to be doing everything right, and that this is now being borne out by performance.
‘With global brand awareness a priority, international sales rebounding and a focus on sustainability in mind, the luxury retailer has performed strongly over the last year,’ she says. Burgeman is similarly positive about Burberry’s strategy. ‘Its decision to exit non-luxury items and discounting is already bearing fruit,’ he says. ‘Burberry is becoming increasingly popular with an engaged younger audience. This bodes well for future profits.’
FUND GIVES ACCESS TO SEVERAL TOP BRANDS
YOU can gain access to shares in luxury brands by buying a fund that holds several. This means that you don’t have to throw your lot in with just one or two companies.
For a low-cost option, Burgeman likes Amundi S&P Global Luxury Exchange Traded Fund, which costs just 0.25 per cent and tracks a number of top luxury brands. Its top holdings include Tesla, LVMH, Richemont, Estee Lauder, Diageo and Nike. The fund is down 15 per cent over a year, but up 32 per cent over three years.
Alternatively, there are a number of funds that have a high proportion of luxury companies, which have been handpicked by a fund manager. These are more expensive because you are paying for their expertise. Options include Fundsmith Equity (down 10 per cent over a year and up 20 per cent over three) and the Morgan Stanley Global Brands (up 4 per cent over a year and up 25 per cent over three).
James Carthew, head of investment trust research data service QuotedData, suggests AVI Global, which has a number of luxury holdings among a broader base of large companies. Nearly seven per cent of the investment trust is invested in EXOR, which owns Ferrari, while Christian Dior makes up four per cent. AVI Global has risen 25 per cent over the past three years and is currently trading at a 10 per cent discount.
Most luxury brands are from Europe, so buying a fund of European companies will also give you some access.
Janus Henderson European Selected Opportunities holds LVMH in its top ten holdings, and FTF Martin Currie European Unconstrained has Ferrari and high-end clothing brand Moncler in its top ten. These funds have risen 13 per cent and 5 per cent over three years respectively.