Overview of At The Money: Should You Invest in Companies Led by Founders?
This Bloomberg At The Money episode examines the investment case for founder-led companies and whether they tend to outperform professionally managed firms. Host Barry Ritholtz speaks with Michael Monaghan, partner and portfolio manager of the Founders 100 ETF (ticker: FFF), about the evidence behind founder-led outperformance, how the ETF selects holdings, and why he believes founders bring a long-term, execution-oriented advantage that can translate into stronger returns.
Main Thesis: Why Founder-Led Companies Matter
Monaghan argues that founder-led companies have historically outperformed because founders often bring a unique mix of:
- Vision — they know where they want the company to go
- Execution — they can translate ideas into action
- Charisma — they can attract and retain talent
- Grit — they persist through difficult periods
- Long-term thinking — they tend to think in decades, not quarters
He cites research suggesting founder-led companies have outperformed meaningfully over time, including a large study of thousands of stocks over multiple decades.
Why Founder-Led Companies May Outperform
More than just tech exposure
Ritholtz challenges the idea that founder-led outperformance is simply a tech-sector effect. Monaghan says the strategy spans the broader economy, not just technology, and that the performance premium is not just survivorship bias.
De-risking as a founder trait
Rather than taking reckless risks, Monaghan argues founders often succeed by de-risking a business step by step. In his view, founders are especially good at solving problems stage by stage while preserving the company’s long-term vision.
Founder mentality vs. hired-management mentality
A central theme is that founders are often more insulated from short-term pressure than hired CEOs, who may be focused on the next earnings call or board presentation.
How the Founders 100 ETF Works
What counts as “founder-led”
The ETF uses a strict definition:
- The original founder must still be actively running the company
- Usually this means the founder is the CEO
- In some cases, it could be a CTO, chief medical officer, or chief scientific officer
- Merely being a board member or chairman is not enough
Handling edge cases
The discussion covered tricky examples like:
- Elon Musk / Tesla
- Berkshire Hathaway
- Monster Beverage
- PayPal / SpaceX
Monaghan says the fund uses a rigorous process and company history to determine who qualifies as the founder, even when the corporate origin story is complicated.
How the 100 holdings are selected
The ETF’s process is:
- Start with the universe of about 800 founder-led stocks at any given time
- Narrow to the 200 largest by market cap
- Use a fundamental/valuation model to choose the 100 best
The portfolio is then rebalanced quarterly.
Portfolio Construction and Exposure
Concentrated but diversified
The fund uses a modified market-cap weighting approach, but no holding can exceed 7.5% of the portfolio.
Monaghan says this creates a concentrated portfolio with meaningful top holdings, but still enough diversification to avoid over-reliance on a small number of names.
Sector mix
Although the portfolio has major tech and AI names, it also includes companies across:
- Industrials
- Energy
- Financials
- Other non-Nasdaq sectors
Monaghan emphasizes that the ETF is not just a Nasdaq-100 clone and has different exposures, including lower semiconductor concentration than the Nasdaq-100.
Selling Discipline: When a Stock Gets Removed
The fund has two main sell triggers:
1. The founder leaves
If a founder announces resignation, the fund will sell the stock within 90 days of the announcement.
2. The fundamentals weaken
A proprietary overlay flags companies when conditions deteriorate.
Monaghan describes this with a “burnt pizza crust” analogy:
- Founders can make great businesses
- The fund doesn’t try to tell them what kind of “pizza” to make
- But if part of the business starts to burn, the fund can remove it
Key Takeaways for Investors
- Founder-led companies have a strong historical record of outperformance, according to the fund manager and cited research.
- The appeal is not just innovation or tech exposure; it’s the combination of vision, endurance, and long-term decision-making.
- The Founders 100 ETF offers access to founder-led companies without needing private-market capital.
- It is a concentrated, actively managed strategy, so investors should not expect it to behave like the S&P 500 or Nasdaq-100.
- The key risk is that the strategy depends heavily on the continued involvement of founders and on the fund’s selection framework.
Bottom Line
The episode makes the case that founder-led companies may deserve a premium in public markets because founders often think differently from hired executives and may be better equipped to build durable, long-term value. The Founders 100 ETF tries to capture that advantage in a public-market format, but with higher concentration and active risk than a broad index fund.