Companies run by billionaires performed twice as well as the market average in the last 15 years and it's part of the 'billionaire effect,' new study says
- Companies controlled by billionaires performed almost twice as well as the market average equity between 2003 and 2018, UBS and PwC's 2019 Billionaires Report found.
- Billionaires' companies are also consistently more profitable than companies not run by billionaires, and shareholders have billionaires' shared personality traits to thank, according to UBS and PwC.
- Self-made billionaires' companies perform even better than those run by the typical billionaire, UBS and PwC found.
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Having a billionaire at the helm is good for a company's stock price, a new report by investment bank UBS and PricewaterhouseCoopers found.
According to UBS and PwC, companies run by billionaires enjoyed returns of 17.8% between 2003 and the end of 2018. That's compared to the MSCI AC World Index's 9.1% return during the same time period. Billionaires' companies were also consistently more profitable and performed better in the six years following an IPO than non-billionaire controlled companies, according to the study.
Released annually since 2014, UBS' Billionaires report evaluates the performance of companies that fit into one of three categories: companies that are steered by billionaires; in which billionaires own at least 20% of the company's stock; or in which billionaire control 30% of the company's voting rights.
"This group has been very good at weathering economic storms and volatility," John Matthews, the Group Managing Director of UBS' Head of Ultra High Net Worth Americas, said at a press event hosted by UBS on Wednesday, "and they outperform in an impressive market. Irrespective if they are public or private, their performance seems to outpace those of traditional companies out there."
Self-made billionaires' companies perform even better than those run by the average billionaire, UBS and PwC found. While companies run by billionaires outperformed the market on every continent, the "billionaire effect," as it is called by UBS and PwC, is strongest among US companies.
"The billionaire effect is alive and well and creates very impressive outcomes," Matthews said. In the report, the authors also state they don't believe the billionaire effect is limited to the 15 years studied and will continue into the future.
Stockholders have billionaires' shared personality traits to thank for the "billionaire effect," according to UBS and PwC
Many billionaires know how to take smart risks, are obsessively focused on their businesses, which allows them to see opportunities others missed, and think longer-term than less wealthy CEOs, the report said.
"[I had a] conversation with a client talking about their success and how he has become successful with his company and his comment to me was, 'John, I don't think in quarters, I think in 10 years,'" Matthews said. "It's a different mindset."
A multitude of studies and books have similarly concluded that billionaires think differently than the majority of the population, and even think differently than millionaires. A review of the personality tests of 43 people with net worths above $11 million by German researcher Rainer Zitelmann found that ultra-wealthy entrepreneurs tend to have high tolerances for frustration and be more detail-oriented than the general population, Business Insider previously reported.
"To sum this up, you can say that rich people are less neurotic and less agreeable, but have a higher degree of conscientiousness, are more open to new experience, and more extroverted than the population as a whole," Zitelmann said.
Entrepreneur Rafael Badziag, meanwhile, spent five years conducting face-to-face interviews with 21 self-made billionaires and found that the same characteristics that make them successful can also lead to their downfalls.
"Billionaires are nonconformists who demonstrate individualism at an early age when they break more than a few rules," Badziag wrote in his book, "The Billion Dollar Secret: 20 Principles of Billionaire Wealth and Success."
"Knowing when to make the leap versus when to run in the opposite direction often means the difference between bankruptcy and billions," Badziag added.
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