HEAD-TO-HEAD: Julius Baer/GAM vs Pictet

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Both funds invest in equities of global luxury brand companies and follow a bottom-up stock selection approach in the investment strategy.

But they are dissimilar in other key aspects. The top 10 holdings in the Julius Baer fund include iconic brands such as Hermes, L’Oreal, LVMH Moet Hennessy Louis Vuitton, Estee Lauder and Adidas, as well as the holding company Richemont which owns names such as Cartier, Piaget and Montblanc, and the world’s largest producer of alcoholic beverages Diageo.

The top 10 holdings of the Pictet fund include some of the same names, but also companies that are more associated with the “affordable luxury” segment and travel industry, such as Marriott, Visa, Las Vegas Sands, The Priceline Group (an online travel booking giant), Walt Disney and Apple.

“The Julius Baer fund is a purer expression of the luxury sector,” said Khizou. With its 34 holdings it is also more concentrated than the Pictet fund, which has 45 positions.

“The Julius Baer fund has a tighter focus than Pictet on iconic high-quality luxury brands,” said Khizou, adding that such brands tend to weather economic turmoil well. “Hermes, which constitutes about 8% of the fund, has performed well in pretty much any environment,” she said.

Holdings in Adidas, L’Oreal and Estee Lauder, which fall into the “affordable luxury” segment, are a play on the millennial demographic and have seen tremendous growth, she added. The beverage and cosmetics subsectors tend to be more defensive than the watch and jewelry segment.

By comparison, the Pictet fund allocates beyond consumer stocks, with 4% in healthcare, 7% in technology (Apple accounts for half of it) and 6% in financial services. Holdings in travel, entertainment and technology companies have broadened its exposure, but also watered down the focus on the luxury sector, she said.

“The managers are not dogmatic in their approach,” she added.

The geographic exposure of the Pictet fund is centered on the US. American companies constitute 53% of the portfolio, French ones 25%.

The Julius Baer fund is more diversified geographically, with 35% invested in French names, 25% in American ones. Italy, Germany and Switzerland account for around 10% each. The fund has recently been reducing US exposure due to high stock valuations, notes Khizou.

Both funds have a high allocation to cyclical stocks compared to the broader consumer goods and services sector. Pictet’s exposure is 73% and Julius Baer’s is 68%, while the sector average is only 32%. Conversely, they are underweight the defensive sector. Pictet’s allocation is 20%, Julius Baer’s 32%, and the sector’s average 53%.

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