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Swiss wealth manager, Julius Baer is to begin promoting a seven-month old fund that invests in luxury goods companies to UK residents.

The Julius Baer Luxury Brands Fund is a pure equity fund with £30m under management since its initial launch in Switzerland on 31 January 2008.

Aiming to attract interest from wealth managers, insurance companies, investment banks and fund of funds, it will be marketed through the Julius Baer Investment Products office in London. The firm said there was no specific target amount that it hoped to achieve in this round of fund-raising.

Individual and institutional investors will be charged annual management fees of 1.6 per cent and 0.85 per cent respectively. The individual tranche is divided into accumulation and distribution share classes, distinguished by their entitlement to dividend payouts.

The fund’s investment strategy is led by Zurich-based Scilla Huang Sun with 17 years of experience in asset management and eight years in the luxury goods sector. During her time at Clariden Leu where she managed a similar fund, Ms Huang Sun was credited with the 2007 Lipper Award for Best Consumer Discretionary Fund over three and five years.

Since launch, the Julius Baer fund has posted negative returns of -4.8 per cent. While performance is not measured against a specific benchmark, it did outperform the MSCI World index which fell 8.1 per cent and the MSCI World Consumer Discretionary index which declined 11 per cent.

Being a pure equity fund there will be no investments in derivatives and the fund will take a bottom-up approach to stock-picking.

“Obviously the investor sentiment is one that is very risk-averse and people are very worried but I think that valuations are very attractive and luxury stocks are very cheap at the moment,” said Dr Huang Sun who has the a third of the fund currently invested in LVMH, Swatch Group, L’Oreal and Diageo. “We believe the sector will outperform the regular consumer goods sector.”

As of 30 June, 43 per cent of the fund was invested in fashion, accessories and jewellery brands and had the greatest country exposure to France with 27 per cent and the US with 20 per cent.

Ms Huang Sun added that while luxury goods consumption will not escape the general slowdown in consumption, markets have already priced this in by a factor of 20 per cent to 30 per cent.

In large part, the fund’s future performance is expected to ride on the growth in spending by the rising number of affluent households in China and Russia who are fuelling demand for Hermes Kelly bags and Patek Phillipe watches.

Ms Huang Sun also pointed out that luxury goods consumption have historically been less affected during economic recessions compared to other consumer goods. Her confidence in the sector is also reinforced by the higher number of wealthy individuals today. According to a 2008 study by Capgemini and Merrrill Lynch, the world’s wealthy will have their total income rise to $59.1 trillion in 2012 from the $40.7 trillion recorded in 2007.

Some wealth managers are sceptical, however.

“There are certainly more wealthy people today but that will not stop them from cutting back spending,” said Mark Dampier, head of research at Hargreaves Lansdown who does not see why investors should put their money into such a niche product. “Luxury brand companies do not always go up. Why is Bentley going on a three-day week? It rather suggests that they are not doing very well. This sounds too much like a marketing idea for my liking.”