The Pitcairn Family Heritage Fund

Abstract

The Pitcairn Family Heritage fund invests primarily in companies controlled by their founding family or a related foundation. The fund was launched in 1989 by Pitcairn Trust, the family office of the descendants of Pittsburgh Plate Glass (PPG) founder John Pitcairn. The fund has delivered good long-term returns since its inception, but in recent years it has underperformed its benchmark by a considerable margin.

The case can be used to discuss what family-controlled firms are, how they differ from widely held corporations, and what their benefits and costs are from the point of view of public investors.

The spreadsheet supplement includes a tool that automatically evaluates the performance of a portfolio of the family-firm stocks that were in the Pitcairn portfolio in Sept. 2006 or a subset of them that students can select by filtering on various family control and management characteristics. By "playing" with these filters, students can discover themselves how family ownership, control, and management affect firm value and bring their findings to bear on the class discussion. I use the Pitcairn case to introduce Financial Management of Family and Closely Held Firms, an elective course that focuses on the financial management and corporate governance aspects of family firms. However, the case can be used more generally to introduce any family business course.

Keywords: Family firms, family office, mutual fund performance, dual-class stock

JEL Classification: G32, G34, G3