Fund returns put investors in the lap of luxury
At a time when raw materials and Chinese shares are losing value, funds investing in the makers of world-renowned luxury goods posted returns of 10 percent or so.
By contrast, raw material funds, which were the hotshot in the first half amid soaring crude oil prices, turned a loss of more than 15 percent.
Korea worldwide luxury P-1 from Korea Investment Trust Management invests in 23 luxury houses such as LVMH, Adidas, Christian Dior and Fossil. LVMH, the world’s largest luxury group, owns household names in luxury like Louis Vuitton and Fendi.Link Luxury Life Style from Industrial Bank of Korea SG Asset Management invests in 28 global companies including Nike, LVMH, Swatch and Coach.
Global Luxury Fund from Woori CS Asset Management encompasses 42 high-end brands including Tiffany, Hermes, Estee Lauder, Coach and Pernod Ricard.
The luxury industry is considered recession proof as its customers are wealthy enough to be relatively unaffected by market conditions. Despite the credit debacle rattling the globe, the second-quarter performance of luxury houses beat market forecasts.
LVMH’s first-half net profit surged 7 percent from a year earlier, propped up by a 25 percent jump in sales revenue across Asia - particularly China. Thanks to the better-than-expected earnings results, LVMH’s share prices picked up almost 10 percent in the past month.
Other fashion brands such as Gucci, Hermes and Burberry also saw their second-quarter sales rise.
But market experts are not overly optimistic about the short-term profits investors can expect from luxury brands because not all the big luxury lines did well.
Bulgari is one case. The Italian fashion mogul had its net profit slide 9 percent on-year in the second quarter.
HSBC said in a recent report that luxury goods makers will feel the ripple effect of a global economic downturn. This is more so because the majority of the companies list their shares on the European or U.S. stock markets.
Regardless of their performance, their shares will inevitably be influenced by global stock trends. Analysts advise investors to invest in luxury funds to widen their portfolios. But they should not pursue immediate gains because the stocks could fluctuate unexpectedly.
“You could invest some portion of your assets in luxury funds, but most domestic investors still place their money in emerging market funds,” said Choi Jung-won, a researcher with Hyundai Securities.
By Ko Ran JoongAng Ilbo/ Seo Ji-eun Staff Reporter [spring@joongang.co.kr]
with the Korea JoongAng Daily
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