Billionaires are of a different breed, which may be good news for investors. Their determination, focus and appetite for risk not only sets them apart, but also drives their companies to outperform others.
This so-called “Billionaire Effect” means that investors in a billionaire-controlled company saw a 17.8% return in the period from 2003 to 2018, almost double the 9.1% of the MSCI AC World Index, UBS wrote in its annual “Billionaire Insights” report.
In addition to the three personality traits that set them apart, billionaires also benefit from long-term thinking rather than placing emphasis on next quarter’s results, according to John Matthews, head of private wealth management and the ultra-high net worth segment at UBS Global Wealth Management.
UBS released the report at a time when billionaires’ wealth is facing increasing scrutiny in the political arena and social media.
The defense of billionaires may be an attempt by UBS to attract more high-wealth investors to the Swiss bank’s stated goal of a five-year plan to commit $5 billion supporting the United Nations Sustainable Development Goals. Other efforts by UBS include a partnership with Align17, a marketplace connecting private wealth with impact investment opportunities.
UBS in September raised $225 million from private clients for KKR’s Global Impact fund. The fund will invest in businesses that contribute measurable progress toward one or more of the U.N. goals without sacrificing financial performance. Launched in 2018, the fund topped its $1 billion fundraising goal.
While millennials are the generation most associated with investing based on environmental, social and governance principles, investing, baby boomers and Generation Xers are increasingly showing interest in the strategy, according to a study from Alliance Life Insurance. Millennials participate in ESG investing at a rate of 17%, while Gen Xers do at a 7% rate and boomers at 3%.
- During the five-year period ending in 2018, the number of women who became billionaires rose to 233 from 160, UBS reported. The increase of 46% outpaced the number of male billionaires, which grew 39%. Examples of women who broke into the billionaire ranks Anastasia Soare, who founded beauty brand Anastasia Beverly Hills, and Tatyana Bakalchuk, who launched Russian online retailer Wildberries.
- The research covered 2,101 billionaires from 43 countries. UBS looked at companies where billionaires controlled at least 20% of equity or voting rights, or where the billionaire evidently steered the company despite having lower levels of official control.
- Billionaire wealth declined $388 billion in 2018 to $8.5 trillion, after five years of growth, UBS said in its report. Technology was the only area where the ultra-wealthy saw an increase last year, with the wealth in the sector rising 3.4% to $1.3 trillion.