Stocks, bonds and commodities are the name of the game for most hedge funds. But LUXUS has a unique investment: Hermès bags. The venture-backed wealth tech company focused on luxury investments founded by ex-Blackstone exec Dana Auslander just debuted two Hermès-only funds dedicated to Birkin and Kelly bags, treating them as investment-grade assets.
“My passion was always to create financial products and alternative investments, so it was mostly hedge funds, private equity, private credit,” Auslander says. “But I’ve always loved the fashion girlies and try to inject a little bit of fun into the boring private equity and hedge fund worlds. My thesis is very simple: the investor and the collector are the same person, so you have to cater to them in the same way, and they want to be able to also invest in the assets that they collect, whether it’s art, whether it’s jewels, whether it’s Hermès. Trust me, a lot of people collect Hermès.”
Backed by Christie’s, as the world’s first Hermès dedicated investment fund strategy, the initial fund raised $1 million in May and realized a 34% net ROI, with a 43-day average resale timeline. Sparked by overwhelming demand, they created a second fund that raised $2 million. Until now, the fund has been in stealth mode, gaining investors via word of mouth. The idea is that Hermès bags perform similar to gold.
“On the secondary market, Hermès Birkin and Kelly bags have demonstrated resilience and appreciation,” says Rachel Koffsky, International head of Handbags and Accessories at Christie’s. “Over the past decade, prices have increased by an average of approximately 5% annually. During the pandemic, as demand surged, prices climbed rapidly. While there was a market correction post-pandemic, values have remained above pre-pandemic levels. Although certain styles experience fluctuations based on trends or availability, the overall trajectory of the secondary market for Hermès Birkins and Kellys has been steadily upward.”
One of the reasons that Hermès bags are so coveted is because they remain elusive. People can’t simply walk into an Hermès store and purchase a Birkin or a Kelly bag—they must be invited. But that doesn’t apply to the resale market. LUXUS carefully curates the bags they purchase. “They’re very, very specifically bought,” Auslander says. “We make sure they’re in pristine condition.” LUXUS purchases two types: The more common Birkins and Kellys in colors like black and beige, which are listed on multiple marketplaces, both digital and physical, such as Farfetch and 1stDibs. The second category is exotic and specialty bags, which are sold by Christie’s and Sotheby’s.
Auslander attended the auction of Jane Birkin’s original Birkin bag in Paris in July, which sold for $10.1 million. “It was unbelievable to see an auction for a woman’s collectible get that kind of attention,” she says. “It’s the most expensive a purse has ever gone for and the second most expensive for any fashion item, the first fashion item being Dorothy’s slippers, so it was really exciting.”
Those in-the-know weren’t surprised by the outcome of the auction. “Over the past decade, awareness of Hermès Birkins and Kellys as collectible assets has grown significantly,” Koffsky says. “Within Christie’s, we have seen the significant and climbing prices achieved at auction play out in the media, attracting new clients and collectors to our future sales. Social media platforms such as Instagram and TikTok have played an important role in the visibility of the secondary market, as collectors and content creators spotlight market trends, rare pieces and record-breaking auction results.”
A cornerstone of the Hermès fund is its dedication to authentication. That’s where Graham Wetzbarger, Chief Authentication Officer at Luxus, comes in. He explains that as the luxury accessory resale market has skyrocketed, high-quality counterfeits have as well. “The quality of the counterfeits of Hermès surpasses that of any other luxury bag,” he says. “There’s a lot of attention being paid by the counterfeiters to the Birkin and their caliber. Back in the day, when you went to Canal Street, you knew you were buying a fake. Now, with most counterfeits being sold online, and with the anonymity of online, they’ll spend a bit more money to make something that’s more convincing so that they can fool the customer into thinking it’s a genuine thing at a good price. They can quadruple their profits. Unfortunately, people don’t realize they’re counterfeits, or they’re buying something based off of images of a genuine thing and receiving counterfeits in the mail.”
Wetzbarger admits that as counterfeit bags are harder to spot, it’s easier and more common to get swindled. He’s seen friends who have invested heavily in bags under the guise of authenticity, only for him to reveal they are counterfeits. Though it’s trickier to discern, there are still telltale signs. “The goal of a counterfeiter is to sell something that looks like something else for a lot cheaper and make a lot of money off of it,” he says. “There is still a difference in what someone is willing to spend to manufacture these items, and it’s never going to be as much as the brands spend. There are differences in quality of goods, of materials, of notions, of components that they buy from other manufacturers, such as zippers, snaps, clasps, anything a metal and obviously the quality of leather. Then fine details, such as branding and intellectual property, and how these trademarks are placed and used.”
By guaranteeing authenticity, LUXUS aims to help stabilize and grow the luxury resale market. Another way they are doing so is by creating an Hermès Pricing Index to formalize market data for structured products. “It’s about what exit channels are the best performers and the right pricing across the board for, let’s say, a Birkin 30-centimeter black Epsom that everybody wants,” Auslander says. “What we’re trying to do is predict, based on patterns, what these bags are going to do, not just today, but also in a year, in three years and five years. Also, we’re able to adjust the portfolios and buy specifically for the portfolio in a way that’s going to optimize the best ROI.”
Though women are the primary customers of Birkins and Kellys, men make up the vast majority of investors for the fund. “I think women are afraid; they don’t like to take risks,” Auslander says. “They don’t like to fail. Men don’t care. Delivering the returns is the most important thing, and men get that. They get that the virality of the Birkin bags causes them to move really fast, and therefore their portfolio is going to deliver twice or two and a half times and you can’t really get that with anything else. It’s bags, but it’s a portfolio. It’s an investment. The investors don’t own a bag—they own a piece of the fund, and that’s never been done.” As an added perk, investors get first dibs on the bags that LUXUS acquires for the fund at a lower price.
Ultimately, the fund aims to disrupt private wealth management by offering alternative investments in luxury goods. “Alternative assets are really, really important right now,” Auslander says. “I think Gen Z and Millennials care less about owning the bags and more about investing in them or the experience of going to the auction and being able to feed off the energy in the room.”