Public companies run by billionaires are better for investors. Shares in companies controlled by billionaires have significantly outperformed the global market average over the past 15 years. Those companies return almost twice the average market performance, according to the new UBS/PwC Billionaires Report 2019.
The billionaire effect: driving outperformance
According to the report, over the 15 years to the end of 2018, billionaire-controlled companies listed on the equity markets returned almost twice the average market performance. Control is defined in the report as owning 20% or more of the company and/or 30% or more of the voting rights. More subjectively, UBS/PWC has also included companies where the billionaire may not have this percent of equity or votes but evidently steers the business.
The billionaire-controlled companies’ annualized performance was 17.8% versus 9.1% for the MSCI AC World Index. Self-made billionaires‘ companies outperformed their multigenerational peers by an average of just 1.4% annually
over the 15 years, with the rate of their outperformance accelerating from 2011. When control remains in the family, outperformance seems to last.
The report also concluded that the billionaire-controlled companies are consistently more profitable. Overall, public and
private billionaire companies’ average return on equity (ROE) was 16.6% over the 10 years to the end of 2018, compared to MSCI AC World Index average of 11.3%. Profitability is highest in the sectors consumer and retail, technology, and financial services.
The billionaire effect, difference per region
There are differences per region. The billionaire effect was strongest in the US, closely followed by APAC, where the Chinese economy, in particular, is continually reinventing itself, letting some businesses expand exponentially while others falter. Europe has lagged behind slightly, yet billionaire-controlled companies still outperformed significantly.
Source: UBS/PwC Billionaires Report 2019
Below an overview of some examples of billionaire-controlled companies (random order):
- Jeff Bezos: Amazon (AMZN)
- Warren Buffett: Berkshire Hathaway (BRK.A, BRK.B)
- Bernard Arnault: LVMH
- Amancio Ortega: Inditex (ITX)
- Bettencourt family: L’Oreal (OR.PA)
- Larry Page: Alphabet (GOOG, GOOGL)
- Li Ka-shing: CK Hutchinson Holdings (CKHUY)
- Elon Musk: Tesla (TESLA)
- Leonardo del Vecchio: Luxottica (LUXTY)
- Jack Ma: Alibaba (BABA)
- Sheldon Adelson: Las Vegas Sands (LVS)
- Mark Zuckerberg: Facebook (FB)
