“In gazing through the window, we sometimes glimpse ourselves as we are and as we would like to be.”
THE WINDOW TO LUXURY
The objective in creating the graphics of this brochure was to reflect not only the beauty of the luxury goods displayed but, importantly, the life and the world we all inhabit on “this side of the window”. The images used throughout this brochure are those of actual shop windows in London, Milan, Dubai and Switzerland. The beauty of the photographs is a testament to the skills of those employees who design and dress these windows in order to tempt us into the world of Luxury - they are the undiscovered artists of our age.
All photographs taken with Nikon D80 Digital SLR. Graphics and layouts constructed on Apple Macintosh.
chic | sheëk | [F. Cf. Chic, n.]
Origin: mid 19th century French word, it has been recognised internationally
since at least the 1870s, that has come to mean smart or stylish: having a certain “Je ne sais quoi”
Adjective: (chicer, chicest) elegantly and stylishly fashionable. Having an highly
attractive but non definable value.
Noun: stylishness and elegance, typically of a specified kind : French chic |
radical chic | Geek chic.
Derivatives: chi cly |chikli| adverb Thesaurus: elegant, sophisticated, dressy, smart; fashionable, high-fashion,
in vogue, up-to-date, up-to-the-minute, contemporary, à la mode, chi-chi, au courant; dapper, dashing, trim; trendy, with it, happening, du jour, in, funky, natty, swish, fly, spiffy, kicky, tony.
Usage: “radical Chic” Tom Wolfe 1930; “casual is fine but make it expensive,
and very chic, if you want to blend in.“ Thomas Cook on Monte Carlo, “elimination is one of the secrets of chic” Harper’s Bazaar, “If it had been worn by somebody with no chic it would never have become a style.“ Edith Head on Audrey Hepburn.
Investment: An innovative and unique approach to passive investment in some
of the worlds most profitable, successful and chicest (adj. chic) companies.
La Raison d’Etre de CHIC Why CHIC
Many market commentators are talking about this period being the “II industrial revolution” as a way of obviating the fundamental changes that are taking place in the world as we know it. It is a difficult claim to argue against. One has simply to consider the implications that the internet, mobile telephony and globalisation have had on all of our lives. This “revolution” is never more apparent than when you consider the luxury sector. A combination of rapidly changing demographics, sophisticated business models and a growing population that is intent on the “nicer things in life” (and that can afford them), means that luxury must now be viewed as not only an investment sector in it’s own right but, as an essential accessory to any investment strategy. CHIC is an extremely innovative investment fund that seeks to encompass this opportunity in a way that has never been done before. Bringing together some of the worlds best names in investment and banking CHIC takes a new approach to what luxury means and how to invest in it...
“To have some luxury in life is now a choice everyone can make. How much is determined by success.”
Qu’est-ce que le Luxe? What is Luxury?
The definitions of “luxury” abound. Economists tell us that this label denotes those goods and services of higher cost and low availability, where the demand rises proportionally (and in some cases disproportionably) to income. Manufacturers rightly point to the superiority of design, durability or performance and the quality or rarity of materials used. Many now equate luxury with the added quality of life or comfort that luxury affords, and more still to the status that it bestows to its owner. Whereas all of the above are correct, to some extent the concept of luxury is now so pervasive in our society that it extends through all aspects of life and requires constant redefinition. From hotels to technology, cars to clothes, sunglasses to perfumes in any, and increasingly every, choice that we make there is now an option that can be described as luxurious. What is luxury? The fact remains that luxury can only be assessed at a personal level. While a private jet may represent luxury to one, equally a good bottle of wine is a luxury to another. What really constitutes luxury is ultimately for each of us to decide - what is certain is that, whatever our definition, we are not only pursuing it, in an unprecedented way, but also demanding it - or at least a little bit of it - in our everyday lives.
L’Économie du Luxe The Economics of Luxury
Luxury as an investment sector is not limited to the obvious choices of fashion and fast cars as this would negate the rich diversity that the sector in reality represents. The way in which CHIC defines luxury through its choice of investments is in itself an innovation, but far from being revolutionary, it honours the fundamentals of a sound investment strategy.
Diversification
The luxury sector provides for an unprecedented level of diversification as it covers a wide range of different industries, markets and currencies. From: technology to entertainment; haute couture to travel, food and beverages to automotive, the sector spans the globe.
“She was shrewd, chic and very good for business.”
Time Magazine on Coco Channel
Brand, Profitability and Growth
One of the central definitions of luxury sector companies is the ability to determine the price and supply of product in a way that protects both their market and profit margin. This, while being one of the fundamental disciplines of luxury brand management, is also a solid basis upon which to build and grow healthy, well positioned businesses.
Good Management
The incorporation of luxury that has taken place over the past 15 years has seen the emergence of some unique companies that balance the concepts of luxury consumer branded goods and services with well run profitable businesses capable of meeting the demands of a global market. Not only are some of the businesses within this sector amongst the biggest in the world they are also amongst the most competently managed.
Sociodémographiques du Luxe Demographics of Luxury
The single most important factor that impacts on the growing success of the luxury sector is of course its customers - both existing and potential - and it is in demographics rather than economics where the most interesting investment story may lie. Demographic trends suggest that the market for luxury goods is changing and will continue to change at a rate that is difficult to comprehend. In Europe and North America we are seeing differing spending patterns and a determined move towards increasing the quality of life through adoption of luxury as being an attainable standard for medium to high income earners. This phenomenon follows the already well established, but equally growing, trend of the luxury connoisseurs of Asia and in particular Japan, Hong Kong and Taiwan. The demographics of the traditional markets pales into insignificance however, when one considers the impact that is being felt from the emerging economies of China and India. Recent research suggests that the growth in China alone will add more than 160 million luxury consumers in the next 5 years1, 22 times the total current population of Hong Kong2 the worlds second largest market for luxury goods after Japan. The combination of a young and increasingly successful population (the average age of Chinese consumers is 25 – 30) with the inevitable association between luxury goods and social status suggests that the future of the luxury sector may be very interesting indeed.
1
Financial Times
2
Hong Kong Census and Statistics Department. Retrieved 02-02-2007
La Démocratisation du Luxe The Democratisation of Luxury
Despite the fact that the luxury industry is firmly imbedded in fine traditions which in some cases stretch over centuries (Hermès est. 1837, Louis Vuitton est. 1854) and the brand theorem that: In order to maintain a true luxury status, a brand and its products must be both expensive, exclusive and be limited to the elite of society. These principles have also been one of the biggest limitations on luxury as a business. The true magic of today’s thriving luxury industry has actually only happened in the last 15 years. The successful fusion of modern business thinking with the traditional uncompromising nature of luxury design has brought many benefits. Not least amongst these are the modernisation of the manufacturing processes, controlled distribution and professional brand management at a global level. Nothing however, has had a greater effect than the quiet acceptance of the principle that a luxury brand can appeal to a much wider market by providing products to every level of the aspirational curve and yet maintain its aura of exclusivity. This “democratisation of luxury” has provided a platform for the international growth of brands for the first time outside the limitations of traditional markets, allowing the luxury sector to cater to a much wider audience that desires, and in fact requires, luxury goods - without damage to the brand itself. In straightforward terms: It is still entirely appropriate for the waiting list for a Hermès handbag1 to be measured in decades2 and yet a Hermès key ring, tie or scarf to be available to everyone today as something special but affordable.
1 2
The Hermès Kelly bag was named for Princess Grace Kelly in 1956 and is widely recognised as the most coveted luxury item in the world. The waiting list for a Hermés Kelly handbag was reportedly closed at 3 years. Inevitably however the unofficial waiting list to get on the waiting list allegedly adds a good number of years to that.
L’Aspiration Aspiration
Much has been written about the aspiration toward a better life, success in business and social standing in relation to luxury products, but this linkage may be a superficial and facile explanation for a phenomena which is both more interesting and germane to the fabric of today’s society. Once limited to being a sign of exalted social standing, our choice of clothes, accessories and other luxury items have now become perhaps the most essential communication tool to introduce ourselves to everyone we meet. Whether choosing the pen that nestles discreetly in the shirt pocket, the Polo shirt and jeans look that says “I am very successful, but off duty right now.” or deciding on which shoes complement which bag, the subliminal messages we send out through our choices are not just important, increasingly they define: Who we are and what we aspire to. Whereas this behaviour is never more pronounced than when applied to the emerging Asian economies, where the desire to demonstrate success is so strongly linked to the concept of face and conformity, it is equally evident in Europe and the US. While it may be true to say that in some Asian circles owning the right accessories is no longer considered a luxury, it is a requirement to even be considered - in many walks of life the same can be said of the ownership of an iPod1.
1
Since it’s introduction by Apple in 2001 the iPod has become the defining personal music player globally, sparking an avalanche of spin off industries and changing the music sales business for ever.
“The cut of his suit and the quality of his shoes says more about a gentleman than a gentleman would ever say about himself.”
Saville Row Tailor.
Le Secteur d‘Investissement Investment Sector
Defining luxury as an investment sector for the purposes of engineering CHIC has required a re-evaluation of popular thinking in order to align it to the breadth of the opportunity that exists. What constitutes the luxury sector is constantly evolving and has different meanings in different markets and at varying levels of society and income. The approach taken was to look to both the essence of what constitutes luxury and which companies are best placed to provide consistent and robust returns against the background of a dynamic economic and demographic picture. Some of the defining qualities being: Recognisable brands with strong market position and scalability Premium product range with high innovation potential Dictate price and supply, high margins Controlled distribution Predictable growth supported by demographic trends Management competence We all want one! The result is a well diversified and well balanced portfolio of highly successful companies whose products are not only well placed for the future but in most cases are also household names to investors in CHIC.
“I’d rather cry in a Rolls - Royce than be unhappy on a bicycle.”
Patrizia Reggiani
Technology Food & Beverages Cosmetics Automotive Accessories Watches, Jewellery & Optics Leisure / Hotel Fashion Sports Apparel
(Indicative Only)
La Stratégie d‘Investissement Investment Strategy of CHIC
The strategy for CHIC is premised on two basic factors: The vision of the luxury sector and how it will develop in line with the economic and demographic view described in this brochure over the long term, and; the fact that luxury and the definition of luxury as an investment will continue to evolve and be refined over time. These principles make way for a simple but highly engineered investment model.
Core Investment:
Nominally between 80% and 100% of the assets will be invested according to a sophisticated model that has been created between Dominion and the Investment Manager (BlackRock Merrill Lynch Investment Managers) which is designed to effectively manage a core “index” of shares in the luxury sector according to defined criteria.
Dynamic Investment:
Up to a maximum of 20% of the CHIC portfolio may be invested more dynamically with the objective of either increasing the overall return of the fund or decreasing the volatility through risk management. This allocation of assets may also be used from time to time to take advantage of evolving opportunities that exist in the sector including qualifying new market entrants (IPO’s) and up and coming luxury brands.
Geox L’Oréal Paris Montres Breguet Blancpain Sheraton Marc Jacobs Kate Spade Kérastase Purdey Acqua Di Parma Lindauer Celine Donna Karan Rado Krug Kenzo Loewe Cacharel Safilo Wolf Blass Baume & Mercier Cessna BMW Vacheron Constantin Cartier Baileys Officine Panerai IWC Piaget Alfred Dunhill Van Cleef & Arpels iMac PlayStation Tanqueray Gin Montblanc Princess Cruises Omega Nike iBook Ballantine’s MGM MIRAGE Mini Jack Daniel’s Le Méridien Martell Stolichnaya Bottega Veneta Wyndham Estate YSL Beauté Smirnoff Balenciaga Boucheron Vaio Sergio Rossi Apple Rolls-Royce Burberry Veuve Clicquot Gucci The Glenlivet PUMA Citation Shanghai Tang Starbucks Swatch Luxottica Yves Saint Laurent Chivas Moët & Chandon SkinCeuticals W Hotels Garnier TAG Heuer Mizani Nautica Bellagio Maybelline NY Lancel Montegrappa Kiehl’s Alexander McQueen Tiffany & Co. Bulgari Lancôme iPod Palm Hugo Boss StefanoBi Omas Hogan Chloé Cunard Redken Porsche Biotherm aloft Vichy Viktor & Rolf Bedat & Co Stella McCartney Louis Vuitton Ellen Tracy Dana Buchman DKNY Jeans Harley-Davidson Bénéteau Polo Shiseido Porsche Design Embraer Nikon Shu Uemura La Roche-Posay Helena Rubinstein Sony Adidas Nordstrom Reebok Ralph Lauren Johnnie Walker Guinness TaylorMade Warnaco Converse Cole Haan A. Lange & Söhne Jaeger-LeCoultre Tod’s Aveda Bumble and Bumble Clinique Bang & Olufsen Aramis Jo Malone Rodan + Fields La Mer Prescriptives Estée Lauder Salomon Wilson Atomic Belvedere Berluti Havana Club Chopin Emilio Pucci Givenchy Fendi Mercier Zenith Hennessy VSOP Gordon’s Gin Hermès Paris Penfolds Thomas Pink Guerlain Fresh Chaumet Billabong
The companies and brands listed above are a representative selection of some of the brands that are owned by the companies that CHIC invests in. As with any investment portfolio the constituents are subject to change at any time. Many of the names that appear are registered trademarks and their use in this context is for illustrative purposes only under the concept of “fair use”.
La Gestion de CHIC The Management of CHIC
Custodian - HSBC Custody Services (Guernsey) Limited
A wholly owned subsidiary of HSBC, one of the world’s largest banking groups with total assets of US$1,700 billion, and 9700 offices in 96 countries and territories. HSBC Custody Services (Guernsey) Limited is the custodian of the assets of CHIC and fulfils fiduciary responsibilities in line with this role.
Investment Manager - BlackRock Merrill Lynch Investment Managers1
BlackRock has been appointed as Investment Manager of CHIC and is one of the world’s largest publicly traded investment management firms with assets under management as at December 2006 of over US$ 1.1 trillion. Headquartered in New York the firm has approximately 4700 employees in 18 countries and a global market presence.
Bankers - Rothschild Group
The Rothschild banking group has offices in more than 30 countries and employs some 2,000 people around the world. The Group provides investment banking, banking and private banking services to governments, corporations and individuals worldwide. N.M. Rothschild & Sons in Guernsey has been appointed by CHIC for banking and credit related services.
Investment Adviser - Dominion Risk Management S.A.
Dominion Risk Management (DRM) is a specialist investment advisory company that is dedicated to the products of Dominion in the areas of risk management and investment strategy. A wholly-owned subsidiary of Dominion Group S.A., DRM is based in Switzerland and is a member of the Swiss Association of Asset Managers.
1
BlackRock Merrill Lynch Investment Managers is a trading name of BlackRock Investment Management LLC following the merger of BlackRock Investment Management LLC and Merrill Lynch Investment Managers Limited in 2006.
La Conclusion Conclusion
One of the great investors of all time, Warren Buffet once said “Keep investing as simple as possible, if you can’t get your head around it, then don’t put your money in it”. It is sound advice and typifies the thinking behind CHIC. In the final analysis CHIC is an echo from days gone by where an investor could have an informed opinion based on real knowledge of an investment sector. More information on CHIC is available from www.dominion-chic.com and your professional financial adviser.
“The only way to feel good about my credit card statement is to buy shares in LVMH.”
Anonymous Investor