Billionaire-controlled listed companies returned 17.8 per cent versus the 9.1 percent of the MSCI AC World Index, in the fifteen years to the end of 2018. This represents almost twice the annualised market performance, according to a new report from Swiss bank UBS and professional services firm PricewaterhouseCoopers.
Furthermore, the most profitable billionaire-owned companies are those owned by self-made first generation billionaires, rather than multi-generational family companies, by 1.4 percent annually. When control remains in the family, outperformance does last, albeit not by as much as the first generation.
This ‘billionaire effect’ can be attributed to billionaires’ greater appetite for smart risk taking and their greater willingness to plan and invest for the long term, said Julie Chan, financial services partner, PwC, Hong Kong. “Billionaires tend to have a long term vision to leave a legacy. They also tend to be highly resilient, determined and unphased by failures,” she added, at the launch of the report in PwC’s Hong Kong office. She quoted a Hong Kong property developer billionaire who had been interviewed for the report, saying: “Our CEO is not motivated by salary nor bonus, instead he has full alignment with the best interests of the family values and stakeholders.”
The UBS/PwC Billionaires Report showed that billionaire wealth globally grew 34 percent over five years to 2018, rising by US$2.2 trillion to US$8.5 trillion. 589 new billionaires were minted during that time, increasing the billionaire population by 39 percent to 2,101.
However in 2018 the boom stopped, with billionaire wealth dropping 4.3 percent, mainly due to trade friction, a strong US dollar and market volatility, said the report.
Meanwhile China’s entrepreneurs have become the world’s second-largest billionaire group over the last five years (behind America), overtaking Russia. Their net wealth has tripled, reaching US$982.4 billion in 2018, although this also saw a downturn last year, dropping 12.3 percent.
There was only one industry where billionaire wealth actually increased in 2018: technology. Technology billionaire wealth increased by 3.4 percent last year; as a group their net wealth has nearly doubled over the last five years, growing 91 percent.
The number of female billionaires has grown by 46 percent over the last five years, with their assets expanding by over a quarter (26 percent) to U$871.2 billion, mainly driven by progress in Asia, said the report.
The report, now in its fifth year, looks at 2,101 billionaires from 43 markets in the Americas, EMEA and APAC, accounting for 98 percent of billionaire wealth.
For the equity market findings, the report looked at 604 publicly listed companies controlled by billionaires as their primary source of wealth, for example Berkshire Hathaway, Facebook and Walmart, and calculating their average annualised returns at the end of years 2003, 2008, 2013 and 2018, using Bloomberg as a data source.