ASX shares that are being driven by their founders generally have a good track record, according to fund manager Ausbil.
The fund manager believes that founder-led businesses "generally outperform".
Ausbil says of the 15 founder-led businesses in its portfolio over the past four years to May 2023, they have delivered a total return of 128%. That's compared to a total return of 18% for the S&P/ASX Small Ordinaries Accumulation Index (ASX: XSOA).
Of course, there's more to delivering good returns than simply having founders still involved in the business, but there are a number of advantages, which Ausbil outlined.
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Skin in the game
Ausbil explained that with founder-led ASX shares, there is a clear "alignment of interest" between the leadership and ordinary shareholders. The fund manager said it's critical for business leaders to have "skin in the game" because "incentives tend to drive behaviours".
Founders usually have large shareholdings in their businesses, so they benefit (and suffer) along with other shareholders with the business succeeding for investors, not just management.
Long-term mindset for the ASX share
Another benefit of ASX shares with founder-led management is that they usually think about the long term, even if that means it's "at the expense of short-term profits".
Ausbil was getting across the point that a strategy can be worth executing if management believes its decisions will "add positively to shareholder returns" – short-term pain for long-term gain.
I'll point here to Rod Drury at Xero Limited (ASX: XRO) and Jeff Bezos at Amazon. Both grew their companies significantly but essentially spent all of their annual profit growth on more investing for long-term gains. Indeed, it seems to have worked out well for them.
Culture
The final main benefit that Ausbil pointed to was the business culture in founder-led companies.
The fund manager believes that "culture matters to performance". It said:
Organisations that are founder-led typically have a stable, consistent yet evolving culture over the long term, and generally one that evolves for the better. You cannot necessarily put a dollar value on the benefit of culture, however a strong company ethos, or reason for being, can drive shareholder value through the value of many working on a common cause.
Which ASX companies are founder-led?
There are quite a few ASX shares that are founder-led that have built a culture of long-term success.
I'll point to names like medical imaging and services company Pro Medicus Ltd (ASX: PME), fund manager business GQG Partners Inc (ASX: GQG), travel management business Corporate Travel Management Ltd (ASX: CTD) and technology distributor Dicker Data Ltd (ASX: DDR) as examples.
Each of these businesses has founders heavily involved (and invested) and they would like to materially grow their businesses over the long term, though share price growth is certainly not a guaranteed thing.
