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Nikkei Markets

Billionaire-led firms tend to outperform others, study shows

Smart risk-taking, longer-term focus among reasons cited by UBS, PwC

UBS and PwC estimate there are 2,101 billionaires globally based on equity values at the end of 2018, with 754 from the Asia Pacific.    © Reuters

SINGAPORE (Nikkei Markets) -- Companies controlled by billionaires tend to generate much better returns as compared to other large companies, says a global study, underlining the importance of the dominant shareholder for long-term performance.

The study, by Swiss private banking giant UBS and professional services firm PwC, looked at companies where a billionaire either owned 20% or more of the equity, held more than 30% of the voting rights, or was clearly the person in charge. The reasons for the superior performance included the main shareholders' business acumen and ability to focus on the long term.

"In our view, billionaires have three distinct personality traits that benefit businesses - smart risk-taking, business focus and determination. Additionally, like family businesses...billionaires' enterprises tend to have a long-term strategy," UBS and PwC said in their annual Billionaires Insights report.

According to the report, billionaire-controlled companies listed on equity markets returned an average 17.8% per annum between 2003 and 2018. This is nearly twice the 9.1% annual return for companies on the MSCI All Country World Index, which tracks more than 2,700 stocks from developed and developing countries.

Billionaire-run companies in the Asia Pacific region achieved returns of 18.4% per annum, just behind their counterparts from the Americas with 18.5% and ahead of those in the Europe, Middle East and Africa, which generated 16.9%.

The superior performance can also be seen in the higher return on equity, which measures how efficiently capital is deployed. For billionaire-controlled companies, the return on equity was 16.6% in the decade to 2018 compared to 11.3% for the benchmark MSCI index.

UBS and PwC estimate there are 2,101 billionaires globally based on equity values at the end of 2018, with 754 from the Asia Pacific. China has 325, followed by India with 106 and Hong Kong with 67.

While billionaires are predominantly male, the number of female billionaires has grown at a faster pace to number 233 globally. Of these, 58 are in the Asia-Pacific.

Four in 10 of last year's self-made female billionaires built businesses in the consumer and retail sector, UBS and PwC said. They cited China's Li Haiyan and Shu Ping who are among the four founders of the Haidilao hotpot restaurant chain, Romanian-American businesswoman Anastasia Soare who is behind beauty brand Anastasia Beverly Hills, and Tatyana Bakalchuk, who founded Wildberries, now one of Russia's biggest online retailers.

-- Kevin Lim

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