An ETF Strategy That Targets Consistently Managed Companies

Global X Funds, a provider of targeted exchange traded fund themes, has rolled out a strategy that specifically focuses on companies led by the original founders of their firms in an attempt to enhance returns and outperform the broader market.

The recently launched Global X Founder-Run Companies ETF (BATS: BOSS) tries to reflect the performance of the Solactive U.S. Founder-Run Companies Index. BOSS comes with a 0.65% expense ratio.

The underlying index is comprised of U.S. large- and mid-cap companies in which a founder or co-founder of the company is serving as the Chief Executive Officer of the company.

Research has revealed that public founder-run companies can be associated with more sustained periods of profitable growth, compared to non-founder-run firms, according to Solactive AG. The outperformance is partly explained by the long-term approach to business planning and strategic decision-making exhibited by founder-run companies.

“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,” Henning Kahre, Head of Research at Solactive AG, said in a note. “The concept naturally tilts towards growth and innovation and away from mature industries relative to a broad cap-weighted benchmark.”