Cashing in on the uber-wealthy

During a Pinnacle Global Equities masterclass, Hyperion’s executive chairman Tim Samway explained that the uber-wealthy have not been this wealthy since the 20s, which provides a buying opportunity for investors.

“The uber-wealthy are getting wealthy because they have had most of the wage rises, asset inflation funded by cheap debt and they are buying luxury products like never before,” Mr Samway said.

Using the example of luxury car manufacturer Ferrari, the investment manager explained how the company has such a loyal fan base that even economic downturns do not affect sales.

“What we love about it as an investment, we look at periods like the GFC where their order book came off 4 per cent, compared to 40 plus per cent for their major competitors,” Mr Samway said.

“That gives us that capital preservation that we really like. What is good about this, about the long tailwind, is that the high-income group that buys Ferrari, that sector, is growing faster than Ferrari can build cars,” Mr Samway continued.

Mr Samway continued to explain that businesses can charge high margin for its products, using the example of sending keys for its new model to its top clients without a price or delivery date and still selling out.

While Europe’s wealthy have remained wealthy for years, it’s the emergence of wealthy people in the United States, Asia and the Middle East that is providing buying opportunities for investors.

In the United States for example, the rise in wealth has been over the last three decades, with the bottom 50 per cent falling in comparison.

“This comes as no surprise when we are talking about the luxury market, that a lot of the luxury manufacturers in Europe are growing because there is the rest of the world to sell to. They are selling to the Middle East, the United States and Asia,” Mr Samway said.

Predicting forward, the fund manager is predicting much of the same, with the haves continuing to expand their margins over the have-nots.

“The uber-wealthy don’t look like giving up their position anytime soon, that’s all a one-way street for some time to come.”

“Luxury businesses continue to manage scarcity well, and they all trade on high returns on equity.”

“They are reinvesting at a rate your clients can’t possibly do,” Mr Samway concluded.

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About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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