- A growing number of investments focus on companies that treat women fairly.
- Investment professionals behind these strategies argue that gender diversity contributes to financial performance.
- Investors who want to invest in such funds should check to make sure the strategy and allocation matches their overall financial goals.
The Women's March this weekend may have inspired you to see women get ahead, particularly in the workplace. But does your investment portfolio match that goal?
A growing number of investments are aimed at companies that include and promote women.
As of November, so-called "gender lens investing" included 22 investment strategies, 18 of which focused on U.S. investors, according to research from wealth management firm Veris Wealth Partners and consulting company Catalyst At Large. Since then, 12 new gender lens investing strategies have emerged, said Patricia Farrar-Rivas, CEO and founding partner at Veris.
Assets in these strategies have also jumped by 41 percent to $910 million, as of the 12 months ending June 30, 2017.
Gender lens investing is not new — the first strategy emerged as early as 1993. But the number of investing strategies grew the most over the past five years, according to Veris' research.
That growth comes as the national conversation on gender has put new light on the need for equality in the work place, said Joe Keefe, president and CEO at mutual fund company Pax World.
"We have to understand that more gender-diverse leadership is a key part of the answer," Keefe said. "And that's where gender lens investing comes in."
Pax's fund, called the Pax Ellevate Global Women's Index Fund, was originally established in 2007 as an actively managed fund. In 2014, Pax partnered with former Wall Street executive Sallie Krawcheck to relaunch the fund as an index strategy. The fund follows an index that focuses on companies that have women represented on their boards and in leadership positions.
Today, the fund includes about 400 companies. Its top holdings, as of Dec. 31, include Microsoft Corp., Texas Instruments Inc. and KeyCorp. Almost all of the companies in the fund — 99 percent — have two or more women on their boards.
The fund also takes an active shareholder role. In 2016, the fund filed a shareholder resolution with Apple Inc. The company ultimately agreed to conduct a pay audit and address any compensation disparities that existed.
"By working with those companies as a shareholder, you can make a difference," Keefe said.
State Street Global Advisors, which launched an exchange-traded fund focused on women in 2016, also takes an active shareholder role.
"We get to vote on who makes it in and out of the board," said Jenn Bender, senior managing director and director of research at State Street Global Advisors. "The ones that have no women on their boards, we are likely going to vote against their resolutions."
State Street's fund, with the ticker symbol SHE, focuses on companies with the highest percentage of female managers in their respective sectors. The index upon which the fund is based is rebalanced every year, Bender said.
The fund itself can serve as a "good replacement" for an ordinary equity allocation, Bender said.
"Having more diversity and views … is better for companies," Bender said. "They tend to be more agile and envision what the future looks like better than other companies."
Research has shown that companies that embrace gender diversity have the potential to perform better.
A 2012 Credit Suisse Research Institute report found that large-cap companies with at least one woman on their boards outperformed companies with no female board members by 26 percent.
"The bottom line is if a board is comprised of all 60-something white men, perhaps all former CEOs, their decision making is not going to be as good as a diverse board," said Eve Ellis, financial advisor and portfolio manager of the Matterhorn Group at Morgan Stanley. "Their discussions will be richer, and the outcomes will be financially stronger for the companies."
Ellis started a gender lens investment strategy, named the Parity Portfolio, five years ago after hearing from her wealth management clients that they wanted to make investments in line with their values.
The Parity Portfolio includes 25 to 35 U.S.-based companies with a minimum of three women on their boards. The strategy also looks at other metrics, such as whether companies have completed a pay equity audit or have a history of gender discrimination or other violations against women.
It is important to note that gender lens investing isn't just about investing in companies that are nice to women; it's also about financial performance, said Jackie VanderBrug, managing director at private bank U.S. Trust.
"It is not small or soft or pink," VanderBrug said. "These are mainstream quantitative approaches to analyzing future risk and opportunity."
U.S. Trust's Women and Girls Equality strategy focuses on companies that employ more women in all areas of their businesses and also have family-friendly corporate policies, such as child and elder care, as well as strong track records in hiring and promoting women. It is designed as a core equity holding, VanderBrug said.
Farrar-Rivas of Veris Wealth Partners said her firm, which focuses on sustainable and impact investing, has seen an uptick in interest in gender-lens investing from its high-net-worth clients, and not just women.
"A lot of our male clients really love this strategy because they have daughters in the work place," Farrar-Rivas said. "You want your daughters to succeed as well as you want your sons to succeed."
Different funds have different minimum investment requirements. While State Street's SHE exchange-traded fund has no minimum, other products do. Pax's fund requires a minimum of $1,000 to invest in its individual share class. Other products, like Morgan Stanley's Parity Portfolio, requires $250,000, though that can be lowered for the firm's clients, according to Ellis. U.S. Trust's strategy is exclusively for its clients and those of Merrill Lynch.
Funds come in various forms. Beyond traditional mutual funds and ETFs, the selection of investments also includes an exchange-traded note, certificate of deposit, hedge fund and separately managed accounts. If you are interested in putting your money in this space, make sure the type of fund and allocation matches your investment goals. You may also want to consult a professional financial advisor.