HEAD-TO-HEAD: Morgan Stanley IM versus Pictet AM

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Introduction

Thematic funds have enjoyed a surge in popularity in recent years. The rapid development of new technologies and a wider appeal of ESG factors, in particular, have encouraged asset managers to offer investors myriad products, some with a narrow mandate, others with broader discretion.

Although not typically designated thematic, funds that specifically focus on companies that boast of luxury or premium brands have been around for many years.

These funds try to identify companies that are built on dominant market positions, supported by powerful, hard to replicate intangible assets that can generate high returns on operating capital and have strong free cash flows. Other characteristics are recurring revenue streams, pricing power, low capital intensity and organic growth.

Premium and luxury brands can also demand higher prices than less glamorous brands with similar tangible functions.

Usually, these companies offer “aspirational” or “experiential” products or services to well-heeled consumers. Increasingly, they market to the growing affluent classes in emerging markets

As individual wealth rises, diets, lifestyles and consumer needs change, including a preference for luxury brands

FSA asked Darius McDermott, managing director at Chelsea Financial Services, to compare two well-established funds that focus on global brands: the Morgan Stanley Global Brands Fund and the Pictet Premium Brands Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 22 June 2020)

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