March is Women’s History Month and it’s more than just an occasion. It’s an opportunity for market participants to evaluate gender lens investing, which is a growing, relevant extension of the broader environmental, social and governance (ESG) landscape.
One of the easiest ways to tap into gender lens investing is via exchange traded funds. While the category is still small, its current constituents offer diverse approaches to this style. Some of these ETFs focus on companies led by women while others hold stakes in listed firms with above-average female representation on boards of directors, in the C-suite and upper management.
“Gender Lens Investing is an impact investment strategy which deliberately integrates gender analysis into investment analysis and decision-making," according to KPMG. "It has garnered increased global attention in recent years, as investors seek to bring new dimensions to the nature of their investments."
Importantly, while there’s an element of doing good by investing in women-focused ETFs, various data points and studies confirm that, over the long-term, companies that are more gender-diverse on their boards and in upper management produce superior returns relative to less diverse competitors. With that in mind, here are some female-focused ETFs to consider.
Hypatia Women CEO ETF (WCEO)
The Hypatia Women CEO ETF (WCEO) is an actively managed fund with a straight forward approach: Its member firms are all companies at which women are chief executive officers.
“Hypatia Capital believes there should be more women at the helm of America’s largest corporations and in the investment management industry," according to the firm. "We strive to make this a reality by focusing on investing in women in leadership in all asset classes. We will not be satisfied until women are as well represented in the CEO suite as they are in the workforce overall."
Owing to the fact that there are just 41 women currently leading S&P 500 companies, WCEO also features mid- and small-cap firms on its roster, enabling it to not only tap into benefits of smaller stocks, but also giving it a roster of 130 holdings. That’s expansive in this still nascent ETF category. Importantly, the outlook for WCEO, which debuted in January, is intriguing.
“The fund is also expected to increase by another 19.7% over the next 12 months, according to the weighted average of analyst price targets of constituent stocks compiled by FactSet," reports CNBC. "The S&P 500 is expected to rise by 14%, FactSet data shows."
SPDR® MSCI USA Gender Diversity ETF (SHE)
The aptly tickered SPDR® MSCI USA Gender Diversity ETF (SHE) celebrated its seventh birthday last week, making it one of the most seasoned ETFs with an emphasis on companies that score well on gender metrics.
SHE follows the MSCI USA Gender Diversity Select Index and attempts to “provide exposure to US companies that lead their sector in demonstrating a commitment towards promoting and supporting gender diversity throughout all levels of the organization,” according to the issuer. In other words, a company doesn’t need to have a female CEO to qualify for entry into SHE’s benchmark.
SHE holds 259 stocks from all 11 global industry classification standards (GICS) sectors. Technology and healthcare names account for about 42% of the portfolio. Apple’s CEO is a man, but it lists five women in high-ranking executive roles and three of its nine board members are women.
IQ Engender Equality ETF (EQUL)
The IQ Engender Equality ETF (EQUL), which tracks the Solactive Equileap U.S. Gender Equality Index, is another relevant consideration in the women-focused ETF category and one that could be a surprising source of protection in rocky market environments.
“ESG indexes focused on gender equality and renewable energy outperformed in 2022, boosted by above-market weights in energy and defensive sectors like healthcare, consumer staples and utilities,” according to Morningstar research.
EQUL separates itself from rivals because its holdings “are committed to women’s empowerment through equal compensation and gender balance in leadership and the workforce,” notes the issuer.
Those metrics lead to a portfolio of 74 stocks, none of which account for more than 2.2% of the fund’s weight. Nearly a third of those components hail from the financial services and technology sectors.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Todd Shriber
Todd Shriber got his start in financial markets as a reporter with Bloomberg News. Later, he became a trader at a Southern California-based long/short hedge fund where he specialized in trading sector and international ETFs leading up to and during the financial crisis. He would later become the web editor at ETF Trends. Currently, he analyzes, researches and writes on ETFs for a variety of Web-based publications and financial services firms.Shriber has been quoted in the Barron's, CNBC.com and the Wall Street Journal. His work has been published on Web sites such as Benzinga, ETF Daily News, ETF Trends, MarketWatch, Fox Business and Nasdaq.com.
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