High-end goods spending encompasses luxury items such as jewelry, watches, handbags, luxury brand cars, clothing, leather goods, perfumes, and cosmetics. Besides tangible products, there are obviously also luxury services by high-quality service providers.
Luxury goods present valid and particularly interesting avenues for investors to diversify their portfolios. Investors should keep in mind that the luxury sector is not isolated from the same risks and failures experienced in other sectors and when times get tough, the demand for luxury goods usually decreases. For an investor seeking to gain exposure to luxury brands, investing in luxury-focused exchange-traded funds (ETFs) is a good and easy way to start.
The luxury sector can be an interesting alternative for investors to diversify their portfolios.
When times get tough, often during recessions, the demand for luxury goods and services tends to decrease, negatively impacting the performance of luxury providers.
Popular luxury-focused ETFs include the Amundi S&P Global Luxury UCITS ETF, the SPDR MSCI Europe Consumer Discretionary UCITS ETF, and the Emles Luxury Goods ETF.
Analyzing the top holdings of consumer-focused ETFs will allow you to get insight into the concentration of their luxury holdings, helping you decide which ETF is right for your risk tolerance.
The Amundi S&P Global Luxury UCITS ETF tracks the S&P Global Luxury Index’s performance. The ETF’s inception date was Nov. 19, 2008, but it changed focus from tracking the MSCI Europe Insurance Index to the S&P Global Luxury Index in 2018, where it now marks an inception date of Jan. 31, 2018. The funds come with a low expense ratio of 0.25%
The fund is offered in two currencies: Euro and USD. As of August 10, 2021, the fund has assets under management (AUM) of 273 million euros in the Euro-denominated fund and $320 million in the USD fund. Its largest holdings include LVMH Moet Hennessy, Tesla, Daimler, Kering, Richemont, Estee Lauder, Hermes, Pernod Ricard, Nike, and Diageo.
According to S&P Dow Jones Indices, S&P’s Global Luxury Index tracks 80 of the biggest publicly traded businesses in the luxury sector that meet its specific requirements for investment. Its top 10 constituents are identical to that of the Amundi fund.
The SPDR MSCI Europe Consumer Discretionary UCITS ETF tracks the MSCI Europe Consumer Discretionary 20/35 Capped Index. The SPDR ETF has total assets under management of 156 million euros as of August 10, 2021. The ETF’s inception date is Dec. 5, 2014, and the management company is State Street Global Advisors. The ETF’s asset class focus is on equities and it has an expense ratio of 0.23%. The fund has a geographical focus on the European Region with the bulk of holdings being French companies.
Its top holdings include LVMH Moet Hennessy Louis Vuitton SE, Daimler, Kering, Richemont, Hermes, Adidas, Prosus, Essilor, Volkswagen, and Stellantis NV.
Another ETF that has some exposure to luxury companies is the Emles Luxury Goods ETF. As of August 10, 2021, it has an AUM of $5.6 million with a recent inception date of Nov. 24, 2020. The fund’s top holdings include Diageo, Apple, Estee Lauder, Nike, Hermes, Adidas, Tesla. Kering, Loreal, and Essilor. The fund seeks to track the Emles Global Luxury 50 Index.
There are many ETFs to invest in and if you are looking for exposure to luxury brands the best way to do so is to look at consumer ETFs and analyze their top holdings. This will allow you to get the type of exposure you desire for your portfolio. Some ETFs may have a strong concentration in luxury goods, others may have a small concentration. Depending on your risk tolerance, choosing the right ETF will depend on the concentration you would like.
As wealthy classes continue to trend towards spending in the luxury sector, more and more interesting options to diversify investment portfolios will emerge. With ETFs like those above introduced, intriguing options continue to emerge for investors to capitalize on such spending patterns.