Introducing the Artemis Leading Consumer Brands Fund

How are you planning to take advantage of the changes in consumer demand within the Artemis Leading Consumer Brands Fund?

Consumer preferences are constantly evolving and offer an exciting source of investment opportunities with a long-term view. We increasingly see consumers extend their purchases well beyond luxury brands and want to therefore capture a wider share of the wallet of this resilient consumer cohort in our new strategy. Experiences (travel, sport, socialising) are regaining the ground they lost during the pandemic to goods.

Can you clarify the distinction between "leading consumer brands" and "luxury" brands from an investment approach?

Luxury companies, listed on stockmarkets, tend to be found across a narrow group of companies: most commonly in fashion/leather and watches/jewellery. Leading consumer brands that offer access to the consumer are found across multiple sectors: travel, cars, wines and spirits, cosmetics, and skincare, to name a few. The hallmark of a leading consumer brand is high and stable profit margins based on keeping prices strong.

Can you elaborate on how you see the investment potential for leading consumer companies in Asian markets, particularly India?

Leading consumer companies already do a lot of business in Asia – even when their shares are listed on stockmarkets in the US or Europe. They receive a far greater share of their revenues from Asian consumers (be they in Asia or travelling outside of Asia) than their peers in other industries such as banks or mobile phones which can be more locally oriented, reflecting their position as a truly global sector.

We see opportunities to increase returns for investors by selectively investing in companies based in Asian markets which have no credible Western substitute. The Indian gold jewellery market – the 2nd largest in the world, would potentially offer such an opportunity.¹

We see South-East Asia and India as providing long-term growth potential for leading consumer businesses as the middle-class populations in these markets expands. India is projected to have both the largest working population of over 1bn people and the youngest (average age of 28) by 2030.² We think this is an attractive combination from an investment perspective.

Could you give us some examples of leading consumer companies where you identified a shift from pure consumption to experienced-based purchases?

Leading consumer businesses today are much more than transactional – namely buying something. Increasingly to remain relevant to companies they are increasingly creating ‘experiences’ which aim to generate more loyalty from their customers, if done correctly. For example Lululemon’s yoga classes in store, Diageo’s launch of White Walker – a limited edition Johnnie Walker whisky coinciding with the final season of Game of Thrones, Moncler partnering with music icon Pharrell or Veuve Cliquot’s limited edition bottles painted by Yayoi Kusama are examples of consumer businesses being part of the wider culture of the times. While leading consumer companies benefit from longevity, we also view their ability to keep innovating as critical to their ongoing success and therefore key to our investment process.

Lastly, can you share your outlook for the global consumer brands sector and any key trends or opportunities you’re keeping an eye on?

Leading brands across the consumer sector have enjoyed a period of heady growth coming out of the pandemic, fuelled by consumers’ desires to return to life as they once knew it, [with a vengeance] is heady + with a vengeance overegging slightly? . We now face an environment where near-term growth is slowing in Western markets, while China remains a ‘coiled spring’ until we see a bigger return of Chinese tourists travelling abroad to Western countries. We expect to see stronger consumer company brands to outperform their weaker peers and think this offers a compelling long-term investment strategy opportunity.

Risks

Market volatility risk: The value of the fund and any income from it can fall or rise because of movements in stockmarkets, currencies and interest rates, each of which can move irrationally and be affected unpredictably by diverse factors, including political and economic events.

Currency risk: The fund’s assets may be priced in currencies other than the fund base currency. Changes in currency exchange rates can therefore affect the fund's value.

Emerging markets risk: Compared to more established economies, investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles, less governed standards or from economic or political instability. Under certain market conditions assets may be difficult to sell.

Sector concentration risk: As the fund has a theme of investing only in companies that own or operate leading consumer brands, it may have investments concentrated in a limited number of holdings. This can be riskier than holding a large number of investments from a wide range of sectors.

China risk: The fund can invest in China A-shares (shares traded on Chinese stock exchanges in Renminbi). There is a risk that the fund may suffer difficulties or delays in enforcing its rights in these shares, including title and assurance of ownership.

ESG risk: The fund may select, sell or exclude investments based on ESG criteria; this may lead to the fund underperforming the broader market or other funds that do not apply ESG criteria. If sold based on ESG criteria rather than solely on financial considerations, the price obtained might be lower than that which could have been obtained had the sale not been required.