The Emles Luxury Goods ETF (LUXE) seeks investment results that correspond, before fees and expenses, to the price and yield performance of the Emles Global Luxury 50 Index, an index comprised of companies that substantially focus on, and significantly benefit from, the sales and consumption of luxury goods globally.
Performance summary of Q1 2021
After finishing a volatile 2020 on a high note, the S&P 500 Index posted new highs in Q1 2021. Global luxury goods stocks, buoyed by a resumption in luxury spending, mirrored strong performance of the U.S. equity market in the quarter, slightly underperforming the S&P 500 in the quarter.
- Contributors: An allocation and stock selection in the consumer discretionary sector aided portfolio performance.
- Detractors: An underweight allocation to non-consumer sectors, particularly to energy, financials, and telecoms, which all had strong returns in the quarter, detracted from fund performance.
- Outlook: Consumer discretionary and consumer staples remain the only overweight exposures. Due to a high allocation to global consumer stocks, performance of the portfolio may be affected by an uneven post-Covid-19 recovery in luxury consumption on a regional basis.
Quarter in review
- The Fund slightly underperformed its benchmark, the S&P 500 Index, from December 31, 2020 to March 31, 2021.
- Various luxury goods companies in the portfolio have been communicating encouraging operating results. For example, LVMH (2.3% portfolio weighting on December 31, 2020), a bellwether for the global luxury industry, posted revenue of €14 billion in Q1 2021, equivalent to organic growth of 30% year-on-year. Other companies have communicated similarly positive results in recent months.
- An overweight position in Volkswagen AG (3.4% portfolio weighting on December 31, 2020), owner of the Audi, Bentley, and Lamborghini brands, was the top contributor as its stock benefitted from a strong rebound in new car sales into the end of Q1 2021. New car sales in Europe jumped 87% year-on-year in March 2021, a trend which is expected to continue globally as the world recovers from effects of the Covid-19 pandemic.
- Consumer discretionary (78% portfolio weighting) and consumer staples (18% portfolio weighting) remain the only overweights, as we continue to have conviction in the resilience of global luxury spending.
- The approvals of various COVID-19 vaccines by global health authorities bode well for increased luxury goods consumption, a sizable portion of which has historically been tied to in-person and travel shopping.