Family values key to Oyster European equities fund success
At a time when investors are seeking themes to give them competitive edge, Eric Bendahan, manager of the flagship Oyster European Opportunities fund at Syz & Co, thinks he has found one – and it is close to home.
The dedicated European strategy manager at the Swiss firm says family-owned businesses are a key to his success, and have driven 80% of the alpha in his fund since he took it over in mid-2005, even though they represented just 30% of the assets over that period.
Oyster European Opportunities gained 37% from family-owned companies from the end of 2005 to April this year, versus 8.5% from non-family owned companies. For the Eurostoxx 600 benchmark, family-owned companies contributed 8.1% returns, whereas non-family owned companies detracted 8.5%.
The corporate structure is more important in his fund, comprising 29%, than in the Eurostoxx 600 index, where family-managed firms comprised just 15%.
Bendahan pointed to a number of advantages of family-owned businesses, including long-term vision, better balance sheets, and more care in undertaking M&A.
He noted that a buy-and-hold strategy such as his aligned well with family-managed firms that are not driven as much by shareholder pressure about regular results – in an environment where the average stock holding period is barely six weeks.
“This pushes the CEO to be more short term focused on how the next set of results will be rather than the strategy for the long term. Because family-owned businesses are in the same mind-set as us and have a patrimonial approach and can plan and think long term, we can extract significant value in the current environment. The patrimonial structure ensures the best alignment of interests for us as mid- to long-term shareholders.”
He pointed to the benefits of long-termism to family owned companies such as chocolatier Lindt, whose growth plans in the US took five or six years before they paid off, “but now they are growing significant market share there”.
Some family owned companies are already considering expanding into the ‘next emerging markets’ such as Africa, the Philippines and Indonesia, after being active in EMs already for decades.
“Family-owned companies can consider frontier markets, which might not deliver profits in the short term, but will in the long term.”
Long-termism was also crucial in sectors such as consumer discretionary and staples, “because brand building and brand equity are paramount for long term shareholders.”
But this was not the only advantage of being a company with at least 20% of voting rights coming from a family or foundation – Bendahan’s definition of ‘family owned’.