Credit suisse family index
Superior growth and returns have been a feature of family-owned companies over time and act as a backdrop to their stock market outperformance. The CS Family report assesses why. The report notes that the revenue growth premium appears relatively robust across all the main regions. This clearly lays the foundation for superior overall financial performance, which in turn supports strong share-price appreciation as well. Family-owned companies have outperformed non-family owned companies since In addition to higher top-line growth, we find that family- or founder-owned companies also generate better profitability.
Index: Families - Credit Suisse
Superior growth and returns have been a feature of family-owned companies over time and act as a backdrop to their stock market outperformance. The CS Family report assesses why. The report notes that the revenue growth premium appears relatively robust across all the main regions. This clearly lays the foundation for superior overall financial performance, which in turn supports strong share-price appreciation as well.
Family-owned companies have outperformed non-family owned companies since In addition to higher top-line growth, we find that family- or founder-owned companies also generate better profitability.
Family-owned companies generate better margins than non-family-owned companies. The balance sheets of family companies are typically less leveraged. This inherent risk aversion remains the case in our latest data. This of course provided a degree of insulation in the financial crisis. They also showed themselves able to reduce leverage much more quickly during the early years after the crisis. The combination of better top-line growth, higher margins, and reduced reliance on external funding for this growth suggests that family companies might also be generating better cash flow returns.
Our analysis indeed suggests that this is the case. It seems this superior profitability, conservative financial structure, and creditworthiness have been typically rewarded with higher equity valuation. Family companies have historically tended to trade at a valuation premium compared to their non-family peers. The key question, however, remains why family- and founder-owned companies generate these better financial metrics, which in turn allow them to outperform broader markets.
Last year's study alluded to the longer time horizon that family companies adopt in their decision-making. This was borne out in the proprietary survey we conducted of a sample of companies from our universe. In this year's report, we wanted to examine the nature of this longer-term focus in more detail.
Specifically, we analyzed four different financial metrics for family and non-family companies that serve as indicators of a longer-term focus in our view. These are:. Our calculations for each of the "long-term-focus" categories clearly suggest that family companies do have a longer-term investment philosophy. Having a longer-term investment focus provides companies with the flexibility to move away from the quarter-to-quarter earnings calendar and instead focus on through-cycle growth, margins, and returns.
This also allows for a smoother cash-flow profile, thereby lowering the need for external funding. In turn, all of this has supported the share-price outperformance of family-owned companies since Continue to the site you have selected.
Main navigation Credit Suisse Home. Premium performance. Family-owned companies grow faster The report notes that the revenue growth premium appears relatively robust across all the main regions.
Superior margins In addition to higher top-line growth, we find that family- or founder-owned companies also generate better profitability. More conservative balance sheets The balance sheets of family companies are typically less leveraged. Load Video.
Valuation premium It seems this superior profitability, conservative financial structure, and creditworthiness have been typically rewarded with higher equity valuation. The reason for more growth and profitability The key question, however, remains why family- and founder-owned companies generate these better financial metrics, which in turn allow them to outperform broader markets. These are: Capex as a percentage of depreciation: A company that invests less than its annual depreciation charge is, all else being equal, clearly not developing its asset base as much for the longer term as companies that spend more than depreciation.
The data suggest that family-owned companies across all key regions do spend more than their annual depreciation on capex and that this ratio is also higher than spending by non-family-owned companies. Growth of gross investment: Companies with a greater focus on long-term development are also likely to have overall higher investment intensity toward their asset base.
Historical data for our family and non-family companies suggest that the former do indeed show stronger growth in gross investment. We would argue that a greater level of spending at least indicates that the company's management has a longer-term focus.
Buy-backs as a percentage of cash flow : Companies that focus on long-term growth are more likely to reinvest internally generated cash flows into their operations rather than use cash for buy-backs or dividends. The data that we have for our universe clearly show that family-owned companies across the key regions do indeed spend less of their cash flows on buy-backs.
Long-term focus is key Our calculations for each of the "long-term-focus" categories clearly suggest that family companies do have a longer-term investment philosophy. Tags: Entrepreneurs , Entrepreneurial Mindset. Related Articles The coronavirus pandemic has the potential to redefine many of our activities, not least the traditional office workplace.
Millennials are digital natives and technology is seamlessly embedded in their everyday lives. Even the oldest in this cohort can barely remember a time without the internet.
As a result, millennials are disrupting traditional business models and are re-defining consumption. Families are the smallest entity in society. Within this social microcosm, the basics of communication and issue resolution are both taught and learnt. Generations not only confront each other but also progress together toward common family goals, providing a global blueprint to long-term success.
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an outperformance of the MSCI AC World Index by. 55%. More precisely, family-owned businesses have outperformed non-family-owned companies in every. The Credit Suisse Family Report assesses why family companies outperform their peers. A key success factor is their long-term investment.
Credit Suisse has launched FX Metrics, a new family of investable foreign exchange indices that offer investors greater flexibility to invest in the FX asset class to meet their specific objectives. While the FX Factor Index generates alpha by dynamically adjusting exposure to the different strategies in response to changing market conditions, the modular approach of FX Metrics helps investors to capture alpha by selecting and combining different macro-driven FX strategies. The strategies employed by FX Factor, which clients can now access individually through FX Metrics are: Carry, which takes advantage of the systematic bias in forward rates; Momentum, which captures the trending behaviour of currencies over the medium term; Value, which is based on signals derived from the Credit Suisse Fair Value model; Terms of Trade, which invests in currencies experiencing a positive trade shock and sells currencies affected by negative shocks; Growth, which tracks the relative performance of currencies with strong economic momentum against currencies with weak cyclical indicators; and Emerging Markets, which takes advantage of the expected appreciation of emerging markets currencies. Like the FX Factor Index, the FX Metrics family of indices employs 18 currencies across the different strategies available — 10 major currencies and eight emerging markets currencies which are all valued against the US dollar. Credit Suisse says the diversity of the strategies available allows investors to access a broad range of investment themes that collectively exhibit low correlation with the historical returns of equities, bonds and commodities.
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Well, in the investment world sometimes what constitutes a family business is open to a broad definition. Perhaps an even too wide a description to be credible.
The Irresistible Charm of the "Family Factor"
Family owned companies tend to outperform their non-family owned peers. This overall finding holds true for all regions, all sectors, and all company sizes. Large, small, old, new, local, global — they come in all shapes and sizes. And, although it may not seem immediately obvious, these companies comprise a large chunk of the global economy. Credit Suisse has been monitoring this phenomenon for a decade. Data collected over the past few years has consistently shown that family owned companies outperform non-family owned businesses.
Credit Suisse Launches ETFs at SIX
The Global Family Business Index is a global ranking of family-owned businesses by revenues. Companies that have not published accounts in the last 24 months are excluded from the Index. The business must be run by the second generation or more. One or more family members must be involved in the running of the business, i. To meet our criterion of a family business, the family should have substantial ownership of the business. Robertsson ey. Helena uses her broad expertise to help her clients resolve complex issues related to national and international taxation. She facilitates success and growth of family enterprises by helping them design long-term strategies and implement the right tools, skills and training to succeed from generation to generation.
