The London Stock Exchange has established itself as the preeminent hub for exchange-traded funds (ETFs) in Europe, boasting over 2,300 listings on its main market. This expansive selection enables investors to construct cost-effective portfolios that tap into various megatrends expected to unfold over the next few decades.
Historically, investments in broad technology ETFs have yielded substantial returns. For instance, individuals who invested two decades ago would have benefited significantly as the influence of the internet and smartphones surged. Additionally, sectors within technology, such as cybersecurity and semiconductors, have also seen impressive growth.
However, the landscape of thematic ETFs is not confined to technology alone. Among the noteworthy global trends emerging is the rise in the number of billionaires. A recent UBS report highlights that the global billionaire population has grown to 2,919, an increase from 2,682 in 2024. This surge includes wealth derived from both inheritance and entrepreneurial success, with the inherited wealth portion marking the largest transfer recorded since 2015. Over the next 15 years, it is anticipated that approximately $5.9 trillion will be transferred to billionaire heirs, suggesting an increase in ultra-high-net-worth individuals globally.
With this influx of inherited wealth, it is reasonable to expect a substantial portion will be allocated to luxury goods. This expectation positions the Amundi Global Luxury ETF (LSE:LUXG) as an intriguing investment opportunity. This ETF encompasses a selection of premier luxury stocks, including renowned names like LVMH, Richemont, Hermès International, and Ferrari, which dominate the ultra-luxury market.
Richemont is known for its ownership of Cartier, while Hermès is famous for creating the coveted Birkin bag. These brands adopt a strategy of intentionally limiting supply to sustain high demand; both avoid mass-market advertising, choosing instead to maintain an exclusive brand image. Hermès follows a long-term strategy grounded in creativity and craftsmanship, emphasizing quality over quantity. Ferrari also adheres to this principle, with CEO Benedetto Vigna asserting the importance of selling fewer cars than the market demands.
The scarcity of these high-end luxury items has elevated their status to that of collectors’ treasures. Notably, an original Birkin bag was auctioned for €8.6 million (£7.4 million) in July, and over half of new Ferraris are sold to clients who already possess multiple models, highlighting the concentration of wealth among the super-rich.
The ETF’s portfolio is diverse, including investments in Royal Caribbean Cruises, L’Oreal, and luxury hotel chains like Marriott and Hilton, thereby engaging with the luxury trend from multiple angles.
Despite its impressive performance—up 124% since 2014—prospective investors should approach the ETF with caution. Such returns may not be guaranteed in the future. While the upper luxury tier has shown resilience against economic downturns, other segments of the portfolio, particularly tourism-related investments, may be more vulnerable during recessions.
However, taking a long-term perspective, the anticipated transfer of $5.9 trillion in wealth and the growth of multi-millionaires, especially in Asia, could bode well for the ETF. It merits consideration alongside other thematic ETFs that align with global wealth-building trends, offering a strategic avenue for investors looking to capitalize on rising affluence.
