Why May Dual Class Shares Outperform? MSCI Answers
MSCI has an inherent interest in understanding how dual share class stocks perform. After all, they construct indices for which they may choose to include or not include such companies.
With several high-profile initial public offerings (IPOs) in recent years, MSCI examined the performance of dual share class companies as well as what may have driven that performance. What did they find? And what implications could those findings have on the North Shore Dual Share Class ETF (DUAL)?
Dual Share Class Companies Outperformed
MSCI analyzed the performance of companies with unequal voting shares from November 2007 to August 2017.
Specifically, MSCI looked at the performance of their indices with and without dual share class companies. They found that indices which excluded companies with unequal voting shares underperformed those which included them by, on average, 0.30% per year.
Notably, in North America, that difference in performance was 4.5% per year.
What May Explain the Outperformance of Dual Share Class Companies?
MSCI found that stock-specific effect accounted for the majority of this outperformance.
Specifically, MSCI found that most of the outperformance was driven by the strong performance for technology stocks during the roughly ten-year period. Many of the companies that issued dual share companies were technology companies.
Additionally, on average, companies issuing dual class stocks had higher growth and profitability than the overall universe of equities.
All of these factors depict reasons why companies utilizing dual share class equity structures may be a worthwhile investment.
Now Can Investors Gain Access to Dual Share Class Companies?
The North Shore Dual Share Class ETF (DUAL)
The North Shore Dual Share Class ETF (DUAL) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the North Shore Dual Share Class Index. The index is designed to track the performance of dual-class companies incorporated in the United States.
DUAL may provide investors with an attractive vehicle to gain exposure to the potential benefits of dual share class companies.
 Melas, Dimitris, Putting the Spotlight on Spotify: Why Have Stocks with Unequal Voting Rights Outperformed? MSCI, 4/3/18