Asien: vom Optimierer zum Innovator
Asien hat bei disruptiven Technologien die Nase vorn, aber wie finden Investoren Anlagechancen?
In the past decade, Invesco Developing Markets Strategy has invested considerable research — and capital — into the luxury good ateliers of Western Europe. While these companies are domiciled in developed markets, we believe they offer a uniquely robust structural growth opportunity that’s principally driven by the developing world, most notably China. Our wide-ranging approach to investing in extraordinary businesses that operate in emerging market (EM) economies has led us to this unique opportunity.
Today, we have approximately $3.9 billion invested (or 8.3% of the strategy’s AUM) 1 in five luxury houses, which makes us one of the largest investors in this niche consumer discretionary industry. Three of these investments – Kering, Richemont and Prada – are particularly meaningful, representing 7.9% of AUM.1
We invest exclusively in businesses with characteristics of sustainable growth, durable advantage, and real options that we believe will unfold, often over many years. Rising affluence in the developing world coupled with the pervasive rise of social media (and in our view, the consequential social anxiety and desire this has created) are pivotal drivers of accelerated growth in the luxury good industry.
New geographic leadership. Luxury’s extraordinary pivot to China has become one of the most inexorable themes to EM investors, with Chinese nationals accounting for 35% of the global personal luxury goods purchases in 2019, up from merely 1% in 1995.2 Structurally, China is on track to contribute approximately half of all luxury goods consumption by 2025.2 In fact, mainland China has become the single largest growth driver for the luxury goods industry worldwide — it was the only region globally to end 2020 on a positive note, growing by 45% to reach €44 billion,3 driven by re-shoring of consumption with pandemic travel restrictions.
New channels. Amid consumers’ rising affinity for digital discovery, big online luxury retailers like YNAP, Farfetch and Tmall were offering the increasingly diverse luxury consumer base with comprehensive and tailored multibrand shopping experiences, with enhanced curatorial and fulfillment capabilities for customers. And more importantly, they were expanding the catchment area for brands given enormous distribution reach and better targeting data.
New models. Furthermore, innovative luxury resale businesses like the Real Real were also conducive to a more diverse and inclusive industry ecosystem, with circularity initiatives increasingly endorsed and adopted by socially responsible leaders like Kering.
We focus on durable advantages in the highly competitive luxury good industry
We are interested in structurally advantaged companies and are long-term investors in scarce, extraordinary brands. We’re not inclined towards investing in transient brand momentum (aka fashion trends). As mentioned previously, our significant investment in the industry is concentrated on three high quality companies that balance heritage with innovation, and marry creativity with rigorous industrial execution.
Scale has become increasingly critical in this business, particularly with the demise of traditional wholesale models (multibrand retail and department stores). As direct control over distribution has become far more relevant, operating leverage has increased across the industry. Despite the evolutionary shift towards digital commerce, we believe luxury goods will remain a retail network-oriented business with high-cost real estate in key global cities. Control of distribution — both in directly operated stores and through brand.com and e-concession businesses — is extremely important, both to maintain profitability in the short term and to maintain brand strength over time.
Scale is also important given heightened digital transformation investment requirements. These include higher capital expenditures to support digital channels and greater communication expenses to manage the increasingly fragmented digital communications channels.
Successful companies must consistently invest across the business to generate a positive feedback cycle of growth and market share gains, most notably in product innovation, multi-channel distribution and communications. After decades of relative operating stability, change is accelerating across the industry. These changes include:
Alongside sustainable advantage, we spend most of our research time thinking about real options embedded in the businesses we invest in. Real options are particularly visible in the long tail of smaller brands which are being increasingly nurtured by conglomerates. The transformation of many ateliers in the universe of French luxury goods specialist LVMH has been dramatic over the past decade of acquisitions — Loro Piana, Bulgari, and the consolidation of Christian Dior. We thought Kering and Richemont, the other two large conglomerates, demonstrated the same potential with brands such as Saint Laurent, Bottega Veneta and Balenciaga. We believed they had a wide tarmac of growth potential across geographies and product categories as conglomerate synergies were optimized over time.
We are investors in extraordinary business across the developing world. And in our view, some of the greatest brands in the developing world — including almost the entirety of the luxury goods businesses — are domiciled in Europe. We have become amongst the largest global investors in a clutch of these wonderful business that have the ingredients we look for across all our investments: durable growth, sustainable advantage, change and real options that we expect to emerge over many years.
Asien hat bei disruptiven Technologien die Nase vorn, aber wie finden Investoren Anlagechancen?
Warum wir glauben, dass Schwellenländeranleihen in Lokalwährung einen genaueren Blick lohnen.
Effektive Instrumente für ein breites und diversifiziertes Engagement, um von zunehmenden Chancen in den Schwellenländern zu profitieren.
1 Source: Invesco, as of 12/31/2020
2 Source: Altagamma, 12/31/2020
3 Source: Bain & Co., 01/14/2021
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
As a large portion of the strategy is invested in less developed countries, you should be prepared to accept significantly large fluctuations in value. The strategy invests in a limited number of holdings and is less diversified, and therefore this may result in large fluctuations in value. Investment in certain securities listed in China can involve significant regulatory constraints that may affect liquidity and/or investment performance.
Data as of 30 April 2021 unless stated otherwise.
This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.