The Best Funds to Invest in Successful Family Companies | Funds and Plans

Play the guy. That is what entrepreneurs do. And that is what differentiates the companies in which the founder is still involved, and those that are not. The presence of the entrepreneur or his descendants in the shareholding usually guarantees the investor higher levels of return than their competitors. When management oversight is a family affair, controls are stricter. Not surprisingly, more than 60% of the family assets are concentrated in the company itself. In addition, there is greater capacity for innovation, and a long-term vision predominates, which allows us to better weather economic crises. Facebook, Alphabet (Google matriz), Samsung, Roche, LVHM (Louis Vuitton), L’Oreal, Inditex, Tesla, Nike…. are some examples of firms in which the founder or his family continue to have an important part of the capital and which have reaped enormous success.

The private bank Credit Suisse produces a report each year with the 1,000 most valuable family companies. For a firm to be included in this group, the founder and her family must own at least 20% of the capital and voting rights. The profitability data is impressive. Analyzing the performance of these 1,000 firms between 2006 and 2020, it is found that they have achieved almost 4% more average annual return than non-family listed companies. In the aggregate of these 14 years, it is almost 66% more return.

“I think one of the keys to making family companies work so well is that can afford to think in generations and not quartersIn other words, they do not focus on the short term, which translates into a management perspective based on long-term sustainability ”, explains Asís Maestre, representative in Spain of the Swiss management company Bellevue. As an example, he cites the average tenure of CEOs. In family businesses it is usually 10 years, compared to three or four for non-family firms, “which does not even reach an electoral cycle,” he stresses.

Furthermore, despite the widespread perception that family firms are more conservative, traditional and stagnant, a 2017 Harvard University study showed that the level of innovation is higher in this type of firm. Although they invest less in the innovation and development departments, they do so more efficiently and obtain more patents and new products.

To take advantage of the value of family companies, several specialized managers have launched funds that only invest in this type of firm. Bellevue, Carmignac, Banca March and Credit Suisse have launched investment vehicles specialized in this type of company.

1. Bellevue Entrepreneur

The Swiss boutique Bellevue Asset Management, based on the shore of Lake Zurich, is one of the fund managers that has most specialized in this type of investment. Its specialist is the Norwegian Birgitte Olsen (Bodö, 1966), who has been traveling throughout Europe for more than a decade to meet with the managers of family businesses and, almost always, with the founders.

The fund manager has three vehicles for this type of company. He Bellevue Entrepreneur Europe (which invests throughout the old continent), the Bellevue Entrepreneur Swizerland (which buys only Swiss companies) and the Bellevue Entrepreneur Small & Mid Cap (looking for small and mid-cap firms).

The oldest fund, the Swiss, has accumulated a return of 14% in the last 12 months. Since its creation in 2006, it has rented 152%, which represents an annual average of 6.7%. In its portfolio it has companies such as the chocolate manufacturer Lindt & Sprungli, the freight and logistics specialist Kunhe Nagel, the pharmaceutical giant Roche or the elevator and escalator manufacturer Schindler.

“For us, that the founder of the company continues as CEO is a guarantee,” explained Olsen to Five days In an interview.

In the small company fund, the top position in the portfolio is the Swiss manufacturer of keyboards, speakers and computer mice Logitech, which earns more than 2,000 million euros a year, and its profits grow at a rate of 22%.

As for the European fund, Bellevue Entrepreneur Europe, has had a bad streak. Its average annual return in the last three years has been -10.4%. However, since its creation it has accumulated a return of 149%, somewhat higher than the Stoxx Europe 600 index, which reflects the evolution of the largest European companies.

Its main positions are the Danish brewery Carlsberg (founded 170 years ago and with 70% of the voting rights held by the Carlsberg Foundation), the liquor manufacturer Pernord Ricard (With brands like Absolut Vodka, Beefeater gin, Havana Club rum, and Ballantines whiskey). The firm is headed by Alexandre Ricard, one of the founder’s grandsons, Paul Ricard.

2. Carmignac Entrepreneurs

For Edouard Carmignac, founder of the eponymous fund manager, launching a fund specialized in investing in companies managed by the founding businessman or his family was something very natural since he created his business from scratch. Carmignac Entrepreneurs is a vehicle that invests in family firms throughout Europe. Its average annual profitability in the last 10 years has been 8.1%, despite the disaster in recent months.

One of its main positions is the German pharmacist Dermapharma, specialized in dermatology and allergies, which was founded in 1991 by Wilhelm Beier, who remains president of the firm. It also has an important position in the manufacturer of steel, ships, trains and elevators. ThyssenKrupp, in which the Alfried Krupp von Bohlen und Halbach family foundation still holds 20.9% of the capital and controls the board of directors.

The fund manager, Malte Heininger, who previously worked as model, manages assets of more than 150 million euros and has the second best rating by the analysis firm Citywire.

The fund does not focus only on traditional companies. He also has in his portfolio Delivery Hero, a German technology firm for home delivery, founded in Berlin nine years ago and which has had an exponential profitability, with a market capitalization that today is close to 18,000 million euros.

Another important position in the fund is the Austrian company Do&Do, specialized in airline catering, and founded by the Turkish-born entrepreneur Attila Doğudan.

3. Credit Suisse Family Business

The Credit Suisse fund manager launched the Family Business fund two years ago, a vehicle that invests in family companies with no market or sector capitalization restrictions. Its manager is Javier Suescun.

The fund achieved a yield in 2019 of 13%, but in 2020 its evolution has been very marked by the Covid-19 pandemic (in the first half it lost 10.3%). With the falls caused by the virus, the manager took the opportunity to increase the participation in securities already existing in its portfolio such as Canadian Tire Corporation (a family firm with gas station businesses, sportswear … and even a bank), Fresenius (the largest European hospital company, of German origin), Ferrovial (the Spanish infrastructure company controlled by the Del Pino family) …

In addition, the French liquor manufacturer Pernord Ricard and the sausage toppings firm Viscofan have been added to the portfolio. It has also bought shares in the island’s salmon farming company Feroe Bakkafrost, the Swiss pharmaceutical company Roche and the company of frames and contact lenses EssilorLuxottica.

4. The Family Business Fund

Banca March is another group where the founding family continues to completely dominate the shareholding. In fact, the family has a holding company, Corporación Financiera Alba, which is listed on the Stock Market, and which Banca March controls and which has stakes in companies such as Cie Automotive, Viscofan or Ebro Food (all with a family component). With these ratios, it is not uncommon for its manager to launch The Family Business Fund in 2012 to invest in listed companies where more than 25% of the shareholders belong to a single family, at least one member of the same is involved in the management and there is interest in passing ownership on to the next generation.

The fund has had a cumulative return of 11.9% in the last five years, a far worse record than other comparable funds.

In his case, the first positions are two American giants, Alphabet (Google parent) and Berkshire Hathaway, the conglomerate founded and controlled by Warren Buffett.


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