Asian family-owned conglomerates outperform

Despite operating what many analysts reckon is a business model firmly rooted in the past, conglomerates, or at least the versions controlled by families in Asia, might be a good investment choice, says an analyst.

In a recent note from Will Thomson, managing partner of Massif Capital, which Family Capital mentioned last week, said family-owned conglomerates in Asia look to be a good investment bet. The Asian conglomerate, mostly family owned, is dominant in places like India, Hong Kong, Singapore, Japan, and increasingly in China. Perhaps the region’s most famous one is Samsung, which isn’t just a mobile phone maker but is in a host of other sectors from chemicals to property.

Anyway, Massif reckons the listed part of these businesses might represent a good investment opportunity. Here’s what the note said: “Equity markets tend to ascribe a discount to the valuation of conglomerates but given the economic clout and political connectedness of many of Asia’s conglomerates one has to wonder if this is as true in Asia as it is in the United States or Europe.”

On the basis of that assumption, Massif created an Asian-Family Owned Conglomerate Index, which comprised 33 of the most significant and influential family owned-conglomerates in Asia (ex-Japan). The Index, said Massif, traded at a valuation discount to US indices but its performance is comparable to all but the NASDAQ over a ten-year period ended January 6th, 2016, and in the last year it outperformed all but the Dow Jones Industrial Average.

The investment group concluded: “For stock pickers, this abbreviated analysis of Asian Family Owned Conglomerates vs. US Indices suggests that the group is perhaps a good hunting ground for value. For asset allocators or thematic investors, this analysis suggests their clients would be well served by having an allocation or exposure to some or all of the Asian family-owned conglomerates.”

Yet more evidence of family businesses outperforming non-family companies.