Analysis of the Pictet Premium Brands Fund
6 DEC, 2024
By Andrea Sepúlveda from LatamSelf
The Pictet Premium Brands fund is a global thematic equity fund, domiciled in Luxembourg and launched in mid-2005. It primarily focuses on investments in companies specializing in high-end products and services (high-end). In addition, the management team integrates ESG aspects as a central element of its investment process, qualifying as Article 8 under the SFDR.
Characteristics of the Pictet Premium Brands fund
- Investment strategy: The fund's strategy involves investing at least two-thirds of the net assets in instruments of companies operating in the high-end products and services sector. These companies boast great market recognition, the ability to create or influence consumer trends and, sometimes, a certain power to set prices. The fund is actively managed, not only for the integration of ESG factors, but also because the selection of securities is not tied to the benchmark index. Through active and high conviction management, the investment team uses a combination of market analysis and company fundamentals to select the securities they believe offer favorable growth prospects at reasonable prices. ESG factors are considered to increase or reduce the weight of instruments based on detected sustainability risks.
- Benchmark index: The fund's benchmark is the MSCI AC World (EUR) index, although it does not take into account environmental, social and governance (ESG) factors as the fund does. However, this benchmark is used to monitor risk, return target and performance measurement.
- Investment team: The fund's investment team is led by Caroline Reyl, head of the Premium Brands strategy, with nearly 20 years of experience at Pictet, and by Laurent Belloni, co-manager of the strategy, present at Pictet since its inception in 2005.
- Assets: as of the end of October 2024 (31/10), the Pictet Premium Brands fund managed assets of over 1.600 billion euros.
- Management company: Pictet is one of the leading asset management companies in Europe, with clients and investments in stocks, bonds, alternative instruments and multi-assets. It manages over 280 billion dollars in AUM, has 18 offices worldwide and employs more than 1,100 employees, including 400 investment professionals.
Evolution of the Pictet Premium Brands fund
Note: Past performance does not guarantee future returns. The fund's results may vary depending on exchange rates.
The fact that the fund has almost 20 years of history is a positive point, as it allows to analyze its long-term results and consistency. However, examining the performance reported in the factsheet and on the company's website, it emerges that compared to the benchmark, the fund has not achieved particularly consistent or excellent results. Despite active and high conviction management with ESG considerations, one would expect to see better annualized returns over the long term.
On the other hand, the fund has been compared with a specific sector, perhaps more suitable, using an external source:
In this case, the fund appears better, although it is difficult to assert that the strategy can consistently perform well, both in terms of numerical results and consistency in its quartile.
Regarding risk metrics, we want to analyze a 3 or 5 year horizon. The factsheet provides information on 3-year risk characteristics.
The first obvious observation is that the fund has generated alpha in this time horizon, but it is negative and of significant magnitude, in line with performance results. On the other hand, the fund's beta is greater than 1, which implies that the selected companies (remember that there are few, given the manager's high conviction) show a volatility higher than the market and, overall, a greater risk.
From this portfolio analysis, it emerges that, although the fund can invest worldwide, including emerging markets and mainland China, the portfolio is predominantly allocated in developed markets, with almost 50% positioned in the United States.
Furthermore, regarding the shares that make up the fund, the strong conviction in selection is evident, as the fund commits to holding between 30 and 50 titles. The top 10 titles represent almost 50% of the entire portfolio.
Regarding the sectors, as expected, the sector with the highest exposure is luxury, while other sectors include sports, tourism, and cosmetics.
Conclusions
Advantages
- Institutional size and a long history that allows for in-depth analysis.
- Active and global approach in the selection of titles with strong conviction.
- The fund was launched in 2005 and the Portfolio Manager has remained unchanged since then.
Disadvantages
- The fund has not recorded an exceptional performance compared to a widely used benchmark.
