Global X unveils thematic ETF tracking US founder-run companies

Feb 16th, 2017 | By | Category: Equities

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Global X Funds has launched the Global X Founder-Run Companies ETF (Bats: BOSS), tracking the performance of US large- and mid-cap companies led by CEOs who are the original founders of their firms. The smart beta fund is the fourth in Global X’s “Alpha” suite of ETFs, designed with the aim of delivering broad market-beating returns.

Alex Ashby, director of product development at Global X

Alex Ashby, Director of Product Development at Global X.

The ETF tracks the Solactive US Founder-Run Companies Index, composed of the 100 largest founder-run companies within the parent Solactive US Broad Market Index. The index components are equal-weighted as of the date of their annual rebalance and reconstitution. To maintain an exposure profile broadly in line with its parent index, the methodology caps sector exposures at ten percentage points above the sector exposures of the parent index at the time of rebalance.

Using back-tested data, between the index’s base date of 14 May 2010 and 15 February 2017, the index had returned 17.0% per annum with an annualized volatility of 19.4%. The Solactive US Broad Market Index returned 13.8% per annum over this same period.

Solactive Global X Founder-Run ETF

Source: Solactive AG.

The strategy behind the ETF seeks to exploit the notion that founder-led companies outperform their non-founder-led peers over the long term. Behavioural theories which support this argument suggest the greater emotional attachment to, and higher personal capital invested in, founder-led firms leads the founder/CEO to enact strategic decisions better suited for long-term value creation. According to research conducted by Global X, CEOs of companies currently held in BOSS have ten times higher equity ownership in their companies than the average S&P 500 CEO.

The result is often a more favourable business profile including lower indebtedness (BOSS companies currently average 52% lower debt-to-equity ratios than the average S&P 500 company), greater allocations to research & development, and stronger corporate governance focused on sustainable growth.

“Bringing BOSS to market reinforces our goal of providing unique solutions for investors that are based on academic research and sound index construction,” said Alex Ashby, Director of Product Development at Global X. “Founders bring a unique vision and innovative culture to their companies that we believe will translate into more sustainable long-term growth.”

Henning Kahre, Head of Research, Solactive AG, added: “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.”

The ETF has a total expense ratio of 0.65%.

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