Solactive announces the launch of the Solactive U.S. Founder-Run Companies Index, licensed to Global X Funds as the underlying index for the Global X Founder-Run Companies ETF (BOSS) listing for trading today on BATS…..
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Henning Kahre, Head of Research, Solactive AG
The index follows the price movements of U.S. companies in which the founder also serves as the Chief Executive Officer. This launch follows the successful release of the Solactive Global Founder-Run Companies Index in 2015 and extends the possibility of investing in the same investment theme with US-specific focus.
Companies led by founder/CEOs share a number of characteristics and performance traits. For instance, research has shown that public founder-run companies can be associated with more sustained periods of profitable growth compared to their non-founder-run peers*. This can be partly explained by the long-term approach to business planning and strategic decision-making characterizing such companies. In addition, studies have shown that companies led by founder/CEOs tend to allocate more capital to R&D and innovation investing**, while they also rely on less leveraged capital structures***. These features can expose investors to potentially different payoffs compared to non-founder CEO’s companies.
Henning Kahre, Head of Research, Solactive AG, commented: “The Solactive U.S. Founder-Run Companies Index is the latest addition to the series of indices focusing on ownership and management structures, such as the concept of family-owned companies, around which Solactive has developed multiple indices. The founder-run investment theme builds on the idea of identifying companies that are run by a visionary CEO with a significant emotional and often also financial stake in the company. The concept naturally tilts towards growth and innovation and away from mature industries relative to a broad cap-weighted benchmark. We are excited to be working with Global X Funds to bring this investment theme to the market.”
Alex Ashby, Director of Product Development at Global X, added: “Bringing BOSS to market reinforces our goal of providing unique solutions for investors that are based on academic research and sound index construction. Founders bring a unique vision and innovative culture to their companies that we believe will translate into more sustainable long-term growth.”
The Solactive U.S. Founder-Run Companies Index is composed of the 100 largest founder-run companies in the Solactive U.S. Broad Market Index. The components are equally-weighted and readjusted annually. The index is calculated in USD as a Gross Total Return index, with dividends reinvested in the index without deduction of withholding tax rates. The index is based on 100 at the close of trading on 14th of May 2010.
*Zook, C. (2016). Founder-Led Companies Outperform the Rest — Here’s Why, Harvard Business Review.
**Fahlenbrach, R. (2009). Founder-CEOs, Investment Decisions, and Stock Market Performance, The Journal of Financial and Quantitative Analysis, 44(2), 439-466.
*** Ampenberger, M., Schmid, T., Achleitner, A. K., & Kaserer, C. (2013). Capital structure decisions in family firms: empirical evidence from a bank-based economy. Review of Managerial Science, 7(3), 247-275.