Investing in Luxury

See. Think. Invest.™ is the philosophy at the core of Dominion’s every investment decision.

Massive population growth in developing markets and unprecedented increases in urbanization have led to rapid economic growth. Together these factors are resulting in a profound change to the socioeconomic profile of the global population. One of the most notable consequences is a dramatic increase in the number of people joining the middle classes, and this is likely to continue through the next decade and way beyond.

One of the inevitable consequences of economic growth is increasing personal wealth, whether it be an increase in the number of high net worth individuals or those that, for the first time in their lives, have some level of disposable income. This in turn leads to one of the most powerful drivers of human behavior – aspiration for an improved lifestyle. This means increased discretionary consumer spending or, to put it more simply - luxuries.

The luxury sector is a very attractive sector to invest in (pun intended). The vast majority of the companies that operate in the sector are cash generating, high margin businesses that cannot easily be imitated or displaced. They are also mostly western-based* companies that are well regulated and transparent, yet at the forefront of aspirational spending in the developing world.

*Typically 97% of holdings in Luxury are traded on the US or European stock exchanges. Click on the Performance page above to see more.

The very definition of Luxury

The challenge of investing in luxury is to correctly define the ever-changing perception of what luxury is to the addressable market and thereafter, to identify those stocks which are most likely to take advantage of the massive increases being observed in consumer discretionary spending. This, we believe, is one of our greatest strengths. The simple thought that luxury is a relative value, i.e. it is different for all of us, allowed Dominion to redefine the luxury sector in 2007 and include not just the classic definition (expensive and exclusive) but to also embrace the fact that there are many forms of luxury which, while much less obvious, make excellent investment opportunities.

Finding the value in Luxury

In order to manage Luxury Fund we examine each of its potential investment holdings to take into account all of the traditional financial metrics. But, this is the Luxury world so it must also include an assessment from another, and less mathematical, viewpoint. This includes: brand strength, social media savvy, fashion trends, and most importantly its appeal to both existing customers and the customers of tomorrow. In this way the management of Luxury is fascinating; because of the nature of the companies it cannot be wholly scientific but, by necessity, is also part psychology, taste and opinion.