Waiting for a payoff in bet on women-led firms
Last summer, investment firms launched two novel options for investors who want to bet on companies with high numbers of women in their top ranks.
An exchange-traded note that Barclays introduced last July tracks an index of 88 U.S. companies that have a female chief executive or a board where at least 25 percent of directors are women, among other criteria.
Around the same time, Sallie Krawcheck, a high-profile former Wall Street executive who owns the women’s professional network Ellevate, teamed with Pax World Investments to start an index fund along the same lines.
Those vehicles for investments also provided a real-world application of research: Studies have shown that companies with greater diversity at the top tend to have better financial performance.
“Research has just been research,” Krawcheck told The Washington Post last year. “This index fund, by investing in the top 400 companies in the world for women — by percent of women on the board [or] percent of women in senior leadership teams— is a way of expressing that investment case.” So how have they done? As it turns out, both investments had underperformed their benchmarks as of June 19. The Barclays Women in Leadership ETN, which launched July 10, returned 7.7 percent through June 19, according to data from Morningstar. That’s lower than the Standard & Poor’s 500-stock index, which returned 9 percent over the same period.
Meanwhile, the Pax Ellevate Global Women’s Index returned 3.94 percent through June 19, since June 4 of last year. That, too, was lower than its benchmark, the MSCI World Index, which gained 5.34 percent.
Liz Wicks, on the structured products team at Barclays, said the results reflected the fact that the fund was overweighted in sectors that underperformed. Barclays caps the number of companies from each sector to get amore diverse index, and it doesn’t mimic the weighting of sectors found in the S&P 500 index.
“If we’d weighted in accordance with the S&P 500,” Wicks said, Barclays’ research shows that “we’d outperform. That’s how you can say it’s not the companies with women in leadership.”
Kathleen McQuiggan, managing director of Pax Ellevate, said that fund was outperforming the market early this year but fell behind in the second quarter due to a strong performance by Japanese stocks. Unlike the MSCI World Index, the Pax fund does not include Japanese companies, because they rarely have women in their top ranks.
“We’re trying not to make any regional or sector bets,” McQuiggan said. “We’re just trying to find the highest-ranked companies” for gender-based-leadership. Overtime, she added, “companies that have this critical mass of diverse leadership at the top, we think, will outperform a broader-based index.”
Robert Goldsborough, a fund analyst at Morningstar, said one year of performance isn’t enough to reveal anything definitive. “We can’t draw a conclusion based on that,” he said. “I would be committing malpractice if I tried to.”
The firms behind these investments could reap other kinds of payoffs. Ian Merrill, a managing director at Barclays, said clients have told him they’re “glad a big bank is putting out a view on this and trying to do something about it.” That has helped him see it as “an intangible value that’s hard to quantify, but it’s well beyond what the assets are.”