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Support Gender Diversity — And Profit From It — With This Unique ETF
From Grant Wasylik: Last Thursday (March 9), the ongoing bull market for the S&P 500 hit eight years in length. Over those eight years, the index has gained a total return of +314.4%, or an average annual return of +19.4%.
But, this past Thursday was an important date for another reason …
It was International Women’s Day 2017.
This year’s theme: #BeBoldforChange. In other words, call on the masses or call on yourself to help forge a better working world — a more gender-inclusive world.
From March 2 to March 10, 43 global stock exchanges conducted bell-ringing celebrations for gender equality.
Frankly, a push for women’s economic empowerment couldn’t come at a better time …
Women take home 1/10 of global income, while accounting for 2/3 of global working hours. (Sustainable Stock Exchanges Initiative)
Per a 2016 review of 1,000 listed companies, the average representation of women in the leadership was 23% in senior management, 21% on boards, 4% have a female chairperson, and 3% have a female CEO. (Bloomberg)
Only 5% of companies in the Russell 3000 Index have female CEOs. (Catherine Yoshimoto — FTSE Russell Senior Index Product Manager)
These numbers are staggering given that women make up 47% of the civilian labor force, of which 75% work full-time.
What can you do to improve the pipeline problem of women in the workplace?
As Meredith Jones, an alternative investment consultant and author of Women of the Street: Why Female Money Managers Generate Higher Returns (And How You Can Too), says you can you can contribute in three easy ways:
1.) Mentor women in your organization.
2.) Interview at least one woman for every position. (You don’t have to hire them.)
3.) Educate yourself on female investment managers.
Speaking of investments, there’s actual evidence showing company — and stock — performance can improve by having multiple females in the C-suite.
McKinsey found companies in the top quartile for gender diversity were 15% more likely to have financial returns greater than their industry average.
For instance, in the last five years, the 20 S&P 500 companies with the highest percentage of female board members have outperformed the broader index by an average of 3% per year.
MSCI (Morgan Stanley Capital International) concluded companies with strong female leadership boasted higher returns on equity (ROE) than those without it. (10.1% ROE for companies with strong female leadership vs. 7.4% ROE for companies without a critical mass of women at the top.)
And another Morgan Stanley research report discovered companies with greater gender diversity produced slightly higher returns and lower volatility over the five-year period from March 31, 2011, to March 31, 2016.
To see even more case studies on how gender diversity works as an investment strategy, check out Pax World Investments white paper: Gender Equality as an Investment Concept.
Thanks to State Street Global Advisors (SSGA) there’s a relatively new ETF that focuses on gender-diverse corporate leadership.
A year ago, SSGA launched the SPDR SSGA Gender Diversity Index ETF (SHE).
I reached out to Jenn Bender, SSGA’s Director of Research for the Global Equity Beta Solutions team. She told me why her company brought this ETF to market:
“We wanted to give investors an opportunity to direct capital to companies that have demonstrated a commitment to gender diversity. At the same time, companies with greater percentages of women at the top have also been shown to demonstrate financial success, both in terms of performance and profitability. We see this as a win-win for investors and for diversity in corporate America.”
SHE tracks the SSGA Gender Diversity Index. This index is made up of large-cap companies that are leaders in their respective industry sectors in advancing women through gender diversity on their boards of directors and in senior leadership positions.
Companies are ranked within each sector by the following three gender diversity ratio-based criteria: (i) ratio of female executives and female members of the board of directors to all executives and members of the board of directors; (ii) ratio of female executives to all executives; (iii) ratio of female executives excluding executives who are members of the board of directors to all executives excluding executives who are members of the board of directors. According to SHE’s prospectus:
The Index comprises companies that are eligible for inclusion based on the ratio-based criteria and which have at least one female in one of the following positions in the company: Chief Executive Officer, chairperson, or member of the board of directors.
This methodology results in 185 current holdings. Here’s a sampling of companies that pass the test:
|Source: SPDR SSGA Gender Diversity Index ETF Fact Sheet, 12/31/16|
So far, SHE has garnered a fair share of interest. In its first 12 months, the ETF has collected $290 million in assets. Granted, the lion’s share of that came from a $250 million allocation from the California State Teachers’ Retirement System (CalSTRS).
This year through March 10, SHE is slightly behind the SPDR S&P 500 ETF (SPY) on a total return basis …
I think there’s a strong chance this fund will pull ahead of the market over time. The index backtests have outperformed the S&P 500 by an average of over 3% per year since mid-2002.
SSGA is also putting its money where its mouth is. To show its commitment to gender diversity, the company will direct a portion of its revenue to charitable organizations that partner with K-12 schools to address gender bias and prepare girls for future business leadership roles.
Due to its large-cap focus, this ETF can be used as a core position in a portfolio. Or if you’re interested in an ESG (Environmental, Social and Governance) or Impact Investing approach, it can also serve as a smaller satellite position.
Shares of SHE are currently trading right at $66.
To learn more about the SPDR SSGA Gender Diversity Index ETF (SHE), click here.
The SPDR SSGA Gender Diversity Index ETF (NYSE:SHE) was unchanged in premarket trading Wednesday. Year-to-date, SHE has gained 5.18%, versus a 6.20% rise in the benchmark S&P 500 index during the same period.
SHE currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #37 of 107 ETFs in the Large Cap Blend ETFs category.
This article is brought to you courtesy of Uncommon Wisdom Daily.
About the Author: Grant Wasylik
Grant Wasylik is an analyst and editor for Uncommon Wisdom Daily — a division of Weiss Research.
Before joining the investment newsletter business, Grant worked as a portfolio manager, lead research analyst and head trader for a billion-dollar wealth management firm for 10 years. He also spent a few years working in a specialized risk-trading department at Charles Schwab — where he was the first-ever, external hire into this elite department. In his first stint in the securities business (after passing Series 7, 64 and 24 exams), Grant ran a margin department and supervised a trade desk for a discount brokerage firm.
Prior to coming to Uncommon Wisdom Daily, Grant was co-editor and chief analyst of The Palm Beach Letter for two years. This monthly publication — with over 70,000 subscribers — focused on safe, income-oriented investments.
Due to his vast investment experience, Grant has a deep contact list comprised of 300-plus mutual fund, ETF, index, hedge fund and other top-notch financial professionals. In addition, he receives special invitations to — and attends — several of the world’s top investment conferences each year.
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