The launch of a new stock market index suggests family businesses don’t just outperform their non-family business counterparts in the long term, but also might just beat them in the short term as well.
As part of its efforts to back Europe’s family business sector, Euronext, the stock exchange seated in Amsterdam, Brussels, Lisbon and Paris, has launched a family business index. The performance of the index shows that it has outperformed the four main stock market indices of the country’s covered by Euronext over most time periods between one year, i.e., the short term. Here’s a link to the performance data to judge for yourself. So far, the index is just for comparison reasons, but a passive investment product that tracks the index might go down well with investors, given its historical performance, if launched.
The Euronext Family Business Index is the first index dedicated to the sector in Europe and is designed to highlight the performance of 90 family companies listed in the four countries covered by Euronext. Sixty-four companies on the index are French and include big name companies like Bouygues, Dassault, and Peugeot. Big names from the other countries include Heineken from the Netherlands, Jeronimo Martins from Portugal, and Solvay from Belgium.
To be eligible to be included in the index a family member linked to the founder or a family that has since taken over the business must have “significant influence on the control of the business”, says Euronext. Also, at least one representative of the family or relatives needs to be formally involved in the governance of the company. And the next generation needs to guarantee control or show a clear-cut intention to take over the company.
Euronext currently has 216 family businesses listed on its markets, together representing a market capitalisation of €852 billion. This includes 157 small and mid-size companies whose total market capitalisation comes to €31 billion, although none of these smaller businesses are part of the family business index.