Gender-focused investors direct their money to women-led businesses

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This is a limited but growing goal in the environmental, social and governance investment movement: gender equity.

So-called gender-focused investing prioritizes companies with a higher representation of women on their boards and management positions, as well as those that perform well in terms of gender. pay equity and other workplace policies that particularly help women, such as generous paid vacation plans.

“We are seeing more and more investors, mainly women (…) who are looking to integrate a gender lens into their portfolios,” said Kathleen McQuiggan, financial advisor at Artemis in Boston.

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About $ 3.6 billion is invested in more than two dozen mutual funds, exchange-traded funds and other equity products that focus on this strategy, according to Parallelle Finance, a research and advisory firm focused on genre. This amount is only a fraction of the $ 330 billion invested in the broader category of ESG investments in the United States, according to Morningstar.

Yet the amount poured into these funds has grown steadily over the past five years or so due to increased investor appetite. The #MeToo movement and high-profile sexual harassment cases have contributed to the growing interest in supporting businesses with greater representation of women or with policies that support gender equality.

Some funds focused on gender equality have performed well this year, while others have fallen behind. For example, the S&P 500 Index returned 24% through October, compared to 17.6% for the Pax Ellevate Global Women’s Leadership Fund, according to Morningstar Direct.

Saying something is gender focused doesn’t mean it won’t use investment criteria.

Jon hale

Director of ESG Strategy at Morningstar

Nonetheless, “there is no reason to believe that you are going to underperform,” said Jon Hale, chief ESG strategy officer at Morningstar. “Saying that something is gendered doesn’t mean it won’t use investment criteria.”

In addition, greater gender diversity in a company is linked to higher stock market performance, better risk management and reduced cases of fraud, said Angela Atherton, director of operations and strategy at Parallelle Finance.

“I personally think the funds will outperform in the long run,” McQuiggan said, describing more women in the business workforce as “the secret ingredient you might want to own this fund instead of this fund.”

Eleven new gender-focused funds have emerged since 2018, including four just last year, according to Parallelle Finance.

As another sign of the strategy’s growth, the assets under management of the 1993 Pax Ellevate Global Women’s Leadership Fund – which is a forerunner in the space, dating back to 1993 – have doubled over the past 20 months, from $ 500 million to almost a billion dollars.

The fund, which requires a minimum investment of $ 1,000 and has an expense ratio of 0.78%, tracks some 400 companies through their representation of women on their boards of directors and their transparency with diversity data gender, among other factors. For example, more than a third of the companies in the fund have female CEOs, compared to 17% of those in the MSCI World index.

Beyond the basics, there may also be an element of advocacy for these gender-based strategies.

“The impact we seek to address is around the cultural challenges that prevent underrepresented populations from thriving in their organizations,” said Nicole Connolly, portfolio manager of the Fidelity Women’s Leadership Fund, which seeks companies with at least one third. of their seats on the board of directors are held by women.

Women now hold only a third of the seats on the S&P 500 board, and only 6% of index companies are headed by women.

The push for gender equality

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At investment manager Nia Impact Capital, promoting gender equity is an ongoing effort.

The company’s $ 470 million global solutions equity portfolio consists of 50 companies that not only have women in leadership roles, but also offer products and services that are beneficial to women and girls. (like breast cancer research).

Nia votes all proxies, talks to companies specifically about diversity, inclusion and gender issues, and shares best practices in fair compensation, diversity and recruiting techniques.

“We actively engage with every business, making our investor voice heard as a right and a responsibility when it comes to the needs of the world,” said Kristin Hull, CEO and Founder of Nia.

Personally, I think the funds will outperform in the long run.

Kathleen mcquiggan

Financial advisor at Artemis

The portfolio includes a minimum investment of $ 100,000 and is available as a separately managed account through trading platforms such as Fidelity Investments or Charles Schwab, Hull said. The cost ranges from 0.7% to 1.5% of assets under management, depending on where the account is held and how much money you have invested.

At the end of the day, there is little that investors can do to improve the representation of women in U.S. companies, experts warn. They say laws and regulations are also needed.

There have been recent movements on these fronts as well.

In August, the Securities and Exchange Commission approved the Nasdaq rule for newly listed companies, which will require most companies to have at least two different directors or to explain why they don’t. The stock market operator has found that more than three quarters of its currently listed companies do not meet this standard.

Meanwhile, a dozen states have passed laws to improve board diversity, or are set to do so.


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