Arguably the most important question an investor has to ask of any company is: “what is your moat?” In other words, what prevents competitors from doing what you do? What allows you to continue to charge a premium price and grow consistently year after year, compounding returns for investors?

In the consumer sphere, for a long time the answer was your store network. Having more bricks-and-mortar shops, close to your customers, was all the competitive advantage you needed. With the rise of e-commerce, this moat was gradually replaced by tech-savviness, logistics networks, and online marketing muscle. In turn these advantages have slowly been competed or commoditised away, and now the industry is facing down an even bigger challenge to competitive positioning, with the rise of agentic artificial intelligence (AI) as a shopping tool.

But through all of this upheaval, one moat has always stood paramount above all others in the consumer space, trumping distribution, store networks, logistics, the lot. Loyalty. The holy grail of a consumer business has always been to engender the kind of loyalty that keeps customers coming back year after year, and that keeps them willing to pay up for your product over any other.

Customer loyalty is dying

Many long-only consumer investment strategies have been built on the premise that you can generate reliable long-term returns by identifying brands that enjoy strong and predictable customer loyalty. Except this approach has encountered one major problem…loyalty is dying.

A number of studies have set out to demonstrate what we’ve already been observing empirically in the market. As SAP’s analysis in Exhibit 1 shows, there has been a precipitous drop-off in the number of customers a business can class as truly loyal. These are the customers that are willing to go out of their way to consistently choose a specific product over others. We expect this trend to continue as the market changes, and more spending power moves into the hands of younger consumers.

New brands are rising from nowhere

The speed at which we’re seeing new brands rise from nowhere, and legacy brands fade from view, is breathtaking. Turbocharged by social media marketing, influencer-led viral campaigns, and now AI agents, the ability of a hitherto unknown company or product to grow from nothing to global reach has never been faster. Spearheaded by younger consumers, it’s now as likely to be a cool new concept from Seoul, Tokyo, or Shanghai gaining market share as it is one from a hundred year old fashion house in Paris.

With the advent of agentic AI on the horizon, we expect these trends to become more, not less, pronounced. As consumer spending moves into the realm of agentic AI, historical brand loyalty is given no weighting by emotionless machines that will purchase based on entirely measurable factors: price and objective quality outweighing previous history or expensive brand advertising campaigns; social media buzz and consumer reviews outweighing historical brand cachet.

Capitalising on changing consumer trends

When we take a step back, what the consumer industry increasingly resembles is the technology industry. Where innovation and disruption have been the norm for three decades. And we think many investors tied to a static approach to investing in the consumer space are ill-equipped to deal with this rapidly changing landscape.

We believe a more dynamic investment approach is needed, and one which goes beyond the bounds of a long-only portfolio, allowing investors to also capitalise on the short side, when brands fall out of favour.

Which is why we have launched the JPM Consumer Long Short Fund. Following in the footsteps of our successful Technology Long Short Fund, which has delivered strong risk-adjusted returns over the last 13 years, we are bringing the same rigorous and dynamic investment process to bear on the consumer space.

The fund provides access to a daily traded long-short vehicle that’s designed to deliver uncorrelated, market neutral absolute returns to clients, generated from alpha in the consumer sector globally. Stock positions are driven by deep qualitative and quantitative research, with our fundamental analysis combined with data-driven insights to help identify high quality companies, with attractive valuations and strong outlooks.

For example, our research has highlighted ASICS, one of Japan’s largest sporting goods maker, which has been regaining global sports shoe share since 2023 by emphasising performance driven running designs and Japanese craftsmanship in its premium Onitsuka Tiger line. Unlike some Western peers with broader ranges, a more disciplined distribution strategy is supporting overseas expansion without heavy discounting, which is helping margins. Innovation, strong direct sales and disciplined inventory management, alongside overseas growth, continue to support consistent earnings upgrades.

We are less positive on the outlook for European luxury goods. The sector has underperformed as growth normalised after the post-Covid surge, with aggressive price hikes and capacity expansion meeting softer aspirational spending as consumers shifted to travel and experiences. Elevated inventories and higher fixed costs compressed margins. In addition, competition has intensified as niche brands have scaled up via social commerce and faster product cycles. Asian luxury labels have also gained traction with localised design and strong beauty offerings.

Positioned to track consumer trends

Since launch in September 2025 the fund has grown to more than $650 million, making it one of the fastest asset raises of a UCITS equity long-short strategy in the industry. Backed by a specialist investment team with long experience generating alpha in the absolute return space, this is a strategy that’s well placed to capitalise on the fast-moving changes driving share prices across the consumer sectors globally.