The Billionaire Effect: Emerging Entrepreneurs and Family Businesses Outperform
Dani Reiss, CEO, Canada Goose Inc.
Jan 09, 2020 A recent study by UBS revealed an interesting fact that could determine the long-term success of a family business – the wealth of the founding leader. Specifically, publicly-listed corporations and family businesses that are controlled by billionaires have outperformed the rest of the stock market by a wide margin.
While the MSCI ACWI, an index that tracks the performance of mid and large-sized listed firms across 23 developed markets and 26 emerging markets countries delivered an annualized return of 9.1% over the past 15 years, billionaire-controlled firms delivered 17.8% over the same period. Profits for these billionaire-controlled firms were also noticeably higher.
UBS credited the risk appetite and business focus of billionaire entrepreneurs for the outperformance. “Like family businesses more generally, billionaires’ enterprises tend to have a long-term strategy,” says the report.
It seems investors could use these findings to identify emerging family businesses and entrepreneurs that are statistically likelier to deliver exceptional results based on their founder’s entry into the billionaire club.
Entrepreneurs like Zoom founder Eric Yuan and Slack founder Stewart Butterfield became billionaires when their respective companies listed last year. Dani Reiss, the CEO of Canada Goose, a third-generation family business, also entered the billionaire club in March, 2019 when the company’s stock skyrocketed.
Meanwhile, in China, the founders of Sino Biopharmaceutical transferred 2.7 billion shares, or 21.45% of the company, to their 24-year old son Eric Tse, making him one of the youngest new entrants to the billionaires’ club last year. In a statement to the press, the family clarified that the move was intended to “refine the management and inheritance of family wealth,” and would not impact the firm’s ongoing operations.
While a recent entry into this exclusive club may indicate long-term potential, losing billionaire status could also mean the family firm is in trouble. Husband-wife duo Jin Sook and Do Won Chang, for example, lost their billionaire status last year as their company, Forever 21, shut stores and eventually filed for bankruptcy.