Suits are in style at New York Fashion Week but not on the runways -- they're in the audience and working behind the scenes.

The kings and queens of private equity and investment capital, as well as retail analysts, are going to fashion shows in search of something that never goes out of style -- information.

They are looking for luxe in what they hope will be all the right places, in step with the trend of Wall Street firms buying equity stakes in fashion houses and analysts aiming to distinguish themselves with independent research.

Fashion Week is an interesting show but the real action happens behind the scenes, said Brian Knez, co-managing partner of the private equity firm Castanea Partners, which just bought a controlling stake in Betsey Johnson, the New York designer known for her free-spirited and feminine clothes.

Sitting on the runway and looking at dresses and handbags doesn't necessarily tell you anything about a company's prospects beyond the next season, said Knez, formerly co-chief executive officer of the Neiman Marcus Group Inc.

As an investor, it's about proactively introducing yourself to knowledgeable industry insiders and understanding what they have to say about who's likely to sustain success over the long term.

Luca Luca, Vivienne Tam and Zac Posen were among the must see designers for Aslaug Magnusdottir, a principal in TSM Capital of New York. TSM was formed recently by Marvin Traub, former chief executive of Bloomingdale's, along with partners Mortimer Singer and Magnusdottir to invest in early-stage luxury brands and retailers.

SEEKING GLOBAL POTENTIAL

We do try to go to quite a few of the shows -- in New York, London, Paris and Milan -- to see if there are attractive investment opportunities, said Magnusdottir, who also saw shows by Rachel Roy, Marchesa and J. Mendel. Traub's agenda included Ralph Lauren and Oscar de la Renta.

In August, TSM Capital bought a 22 percent equity stake in British designer Matthew Williamson, Magnusdottir said.

He's known for very colorful and fun pieces, she said. We look for very high-quality.

We also look for brands that have potential to be global, she said. A lot of the growth in the luxury business is coming from the Middle East, Russia and China and, in the future, it will come from India.

Christine Chen, a retail analyst with Needham & Co., went to see the Max Azria show.

When you go, it's about seeing trends, Chen said. You're seeing styles six months ahead of when they hit the stores.

For an analyst covering stocks of publicly traded apparel companies, this can be critical to spotting signs of success -- or trouble -- early.

If somebody you're covering is doing something totally against the grain, you get a little concerned or, if you see a lot of bad fashion trends all at once, you get concerned about retail in general, she said.

In the private equity boom of the past two years, luxury and fashion companies have held an allure for investors, who have eagerly tried on names such as Valentino, Halston, Jimmy Choo and Barneys.

Merrill Lynch analyst Antoine Colonna recently named 35 companies whose ownership could change hands in the next 18 months. Among his top picks for either a public offering or a partial or full sale were Armani, Dolce & Gabbana, Ferragamo, Prada, Roberto Cavalli, Versace, Harry Winston, Bally, Ermenegildo Zegna, Brioni and Loro Piana.

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