Solactive's new Global Family Owned Companies Index has been licensed to UBS to be used as an underlying for open-end certificates which will be listed at the Swiss structured product exchange SIX in CHF, EUR and USD, and to Barclays which also plans to use the index in products, mainly in France, in EUR and USD.
The index displays the performance of those companies that are in large part owned by families, and focuses on the positive effects of certain ownership structures on the long-term development of a company.
According to Robin Lemann (pictured), head of public distribution Switzerland at UBS, many internationally successful companies are ran by dedicated families that want to pass on a prosperous business to future generations. "A recent analysis by UBS Investment Bank analysts shows that family controlled companies have better long-term performance and profitability," said Lemman. "The experts also discovered that share prices for family-owned companies were less volatile than their peers in global large cap indexes. Same is true for the Solactive Global Family Owned Companies Index. Since 2005 the US-Dollar index generated an annual average return of 8.4% p.a. with a volatility of 15.6% p.a. Compared to the MSCI World index this is an annual outperformance of 3.0% with a 1.3% lower annual volatility."
The index's dynamic methodology assures that the benchmark is regularly adjusted to the newest market environment, according to Lemman.
"UBS Tracker certificates on Solactive Global Family Owned Companies Index offered in CHF, EUR and USD give investors the opportunity to gain broadly diversified exposure to families as a success factor," said Lemman. "The adequate denomination gives investors the flexibility to manage the desired exposure within this specific sector. The index’s composition is dynamic and adapts to market events. Together with the open-end characteristic this allows investors to dynamically participate in this niche market without any additional transactions needed."
Thibault Scaramanga, head of Barclays EFS solutions France, added that "for most of us", family controlled companies are "intuitively synonymous" with fundamental wealth creation based on long term management, strong value foundations and capital preservation.
"The Solactive Global Family Owned Companies Index offers simple access to family firms on a worldwide and diversified basis," said Scaramanga. "Although the index construction is simple, in historical simulations the index substantially outperformed its benchmark over the last 10 years while showing a lower volatility. This is perhaps not a surprise when considering the abundant literature on the value of family controlled companies."
Family owned companies are globally in vogue as they are regarded as an exceptionally sustainable success story, according to Solactive which pointed that recent studies (UBS Global Research - Q Series; Why do Family-Controlled Public Companies Outperform? The Value of Disciplined Governance; 13 April 2015; and Pwc - Zukunft der Familienunternehmen; November 2014) show that family owned companies are able to plan and act sustainably as they are engaged in the company in a long-term manner.
According to the index provider, Family owned companies' experiences and traditions often reach back several decades and can support their decisions in the long-term as well as in the short-term. Additionally, these companies also continuously invest higher amounts in e.g. research than other companies, which positively influence their profitability as well as sustainable success. This approach is clearly seen in the stock performance - family owned companies could beat their peer group over the last ten years with a good outperformance and a significantly better yield/risk ratio, according to Solactive.
The universe of the Solactive Global Family Owned Companies Index is based on the Global Research by the University of St. Gallen, which lists the 500 biggest companies, in terms of revenue, where families hold at least 32% of the voting rights. Out of this universe all listed companies at a regulated and approved stock exchange are further considered as components for the index. All stocks whose market capitalization is greater than US$1bn and whose average daily value traded over the last 3 months equal or exceed US$10m are eligible for the index. Out of this selection the Top 50 companies with the lowest volatility (12-month volatility) are chosen for the index and are weighted by inverse volatility with a cap of 5%.
The Solactive Global Family Owned Companies Index is available as a net total return index as well as price return index and is calculated in EUR, CHF and USD. The index will be weighted quarterly.
Steffen Scheuble, chief executive at Solactive, said that the Solactive Global Family Owned Companies Index is aimed at providing exposure to the long-term development of a company. "Investors can now participate in the positive influence of family ownership and follow a sustainable and attractive yield/risk ratio," said Scheuble, in a statement.
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