How ‘quiet luxury’ is subtly taking over investor portfolios

Quiet
luxury
was
one
of
last
year’s
biggest

viral
fashion
trends
on
social
media
—
but
unlike
other
short-lived
fads
on
TikTok
or
Instagram,
this
one
has
made
its
way
into
investor
portfolios
and
shown
actual
returns.

So
what
is
“quiet
luxury”?

The
trend
revolves
around
understated,
subtle
displays
of
opulence
and
popular
shows
like
HBO
series
“Succession”
have
also
played
a
part
in
boosting
its
popularity.

Gone
are
the
days
of
loud,
flashy
displays
of
wealth
in
fashion
—
it
is
now
all
about
subtlety
and
minimalism.

But
the
trend
has
not
only
gained
traction
in
the
fashion
world,
even
investors
are
starting
to
take
notice.

Luxury
stocks
have
long
been
regarded
by
some
as
an
effective
hedge
against
inflation.
This
is
largely
to
do
with
the
segment’s
high
pricing
that
seldom
deters
its
affluent
customer
base
and
much
higher
margins
than
many
other
consumer
discretionary
products,
such
as
televisions
or
phones.

In
essence,
the
segment’s
fundamentals
have
not
changed
drastically
over
decades
but
as
the
quiet
luxury
movement
takes
hold,
investors
are
starting
to
cherry
pick
names
that
largely
check
those
boxes.

Some
of
the
companies
and
their
labels
have
encapsulated
what
experts
say
is
the
essence
of
quiet
luxury,
with
data
from
Southeast
Asia’s
largest
lender,
DBS
Bank,
showing
that
such
names
have
been
able
to
outperform
their
“loud”
counterparts
in
2023.

Some
of
the
top
companies
that
have
benefited
from
this
new
wave
are


Hermes,

Prada-owned
Miu
Miu,


Brunello
Cucinelli,


Compagnie
Financière
Richemont
and


Swatch
Group,
according
to
DBS.

“With
the
quiet
luxury
movement
underscoring
growing
consumer
preference
for
subtlety
in
luxury
consumption,
companies
that
focus
on
understated
elegance
and
timeless
quality
will
resonate
with
consumers,
benefitting
from
this
trend,”
said
Hou
Wey
Fook,
chief
investment
officer
of
DBS
Bank.

“Hence,
in
2023,
quiet
luxury
companies
notably
outperformed
their
loud
peers
by
23%
points.
We
expect
this
ongoing
shift
in
the
industry’s
dynamics
will
help
sustain
this
bifurcation
in
performance.”

According
to
DBS,
a
company
fall
under
its
categorization
of
“quiet
luxury”
if
it’s
understated
and
focused
on
high
quality,
while
maintaining
exclusivity
and
scarcity.

Some
of
the
bank’s
top
picks
include


Hermes,


Moncler,


LVMH
Moët
Hennessy
Louis
Vuitton,
Richemont,
Swatch,
Brunello
Cucinelli
and

Ermenegildo
Zegna.

Unlike
viral
trends
that
come
and
go,
investors
are
looking
at
these
companies
with
a
much
longer
term
view.

“There’s
this
element
of:
‘I’m
tired
of
all
the
big
logo
stuff,'”
said
Markus Hansen,
portfolio
manager
at
Vontobel
Quality
Growth
Boutique,
noting
that
consumers
and
investors
now
want
a
higher
quality
product.

“It
comes
back
to
the
heritage
of
these
houses,
which
are
the
ones
that
are
the
most
successful
…
and
what
we
invest
in
are
the
ones
that
take
a
very
long
term
view,”
he
told
CNBC.

In
Asia-Pacific,
the
demand
narrative
for
luxury
goods
could
be
shifting
due
to
China’s
uneven
post-pandemic
recovery
and
lackluster
domestic
demand.

Though

Chinese
consumers’
appetite
for
luxury
goods
may
not
have
completely
dried
up,
luxury
brands
are
broadening
their
horizons
to
cater
to
other
big
markets
in
Asia.

In
Asia,
mature
markets
like
South
Korea
and
Japan
are
seeing
growing
demand
for
luxury
goods,
Hansen
said.

He
added:
“India
is
the
last
big
market,
not
just
the
population,
but
in
terms
of
the
growing
wealth
of
the
population.”

A
recent
Goldman
Sachs
report
predicted
around

100
million
people
in
India
will
become
“affluent”
by
2027
—
defined
by
the
U.S.
investment
bank
as
those
earning
an
annual
income
exceeding
$10,000.
Currently,
60
million
people
in
the
world’s
fifth-largest
economy
earn
more
than
$10,000,
the
report
said.

Quiet
luxury
stocks
were
bumped
up
in
portfolios
last
year,
pushing
down
brands
that
were
considered
too
“loud.”

As
a
result,


Kering-owned
Gucci
&


Burberry
were
pushed
lower
in
global
rankings
of
luxury
stocks,
Bank
of
America
Securities
research
showed.

“We
believe
that
throughout
the
year
brands
should
focus
back
on
fashion
content
and
newness
in
order
to
re-engage
customers
and
drive
traffic,”
said
BofA
research
analyst
Ashley
Wallace,
noting
that
companies
that
are
geared
toward
quiet
luxury
are
better
positioned
this
year.

BofA
said
it
preferred
companies
like
LVMH
and
Hermes
over
Gucci-owner


Kering
and
Burberry.