Finding women-led ETFs is like looking for a needle in a haystack.
A recent Canadian Investment Regulatory Organization statistic said that out of 3,993 portfolio managers registered with the regulatory body, only 14% were women. Of the 726 associate portfolio managers, just 17% are women.
Most people interested in becoming portfolio managers work to achieve the Chartered Financial Analyst (CFA) designation, a prerequisite for getting a job in investment management. Globally, women accounted for 20% of all CFAs in 2023. In 2011, it was 19%, indicating that women haven’t flocked to the profession.
Nonetheless, I’m a big believer that women make excellent portfolio managers. There would be more of them if the profession did a better job of interacting with students before graduating from university. But that’s a subject for another day.
Today, Cathie Wood, the head of ARK Investment Management, would be the most prominent female portfolio manager in the U.S. I’d like to find more.
While finding women-led mutual funds is easier, I will focus my search on active managers running ETFs listed on U.S. stock exchanges.
Here are my three women-led ETFs to buy now.
ARK Innovation ETF (ARKK)
Source: Spyro the Dragon / Shutterstock.com
There is no question Wood is one of the most polarizing characters in portfolio management, male or female. In July, Barron’s published an opinion piece by William Bernstein – I have Bernstein’s first edition of The Four Pillars of Investing in my investment library – about the downside of following a superstar portfolio manager like Wood.
“Among financial journalism’s 50 shades of investment porn is the super-star fund manager story. As we’ve already seen, at any given time, purely by chance, one fund or another will shoot out the lights, and the star-manager genre is a hardy financial media perennial,” Bernstein stated.
He discusses the history of superstar portfolio managers and why they always seem to fail to deliver over the long haul. It’s an interesting read.
As for ARKK, it’s actively run by Wood, charging 0.75% annually for her portfolio management services. That’s not unreasonable for an actively managed equity ETF.
At the height of Wood hysteria, ARKK stock traded near $160 in February 2021. Despite a 47% gain in 2023, the ETF is still down 71% from its all-time high.
Of Wood’s top 10 holdings, at least half of the stocks held by ARKK are companies that I would recommend as long-term buys. While Bernstein points to Wood’s previous poor performance before starting ARK in 2014, the industry needs more women like her as lead portfolio managers.
Hypatia Women CEO ETF (WCEO)
The Hypatia Women CEO ETF (NYSEARCA:WCEO) received a lot of press before and after it was launched on Jan. 9.
“Existing ETFs focused on advancing gender diversity have struggled to lure investors and have performed largely in lockstep with the broader benchmark gauge this year,” Bloomberg.com reported on the soon-to-be-launched ETF last November.
“The $209.2 million SPDR SSGA Gender Diversity Index ETF (SHE), which is the largest of such funds, has fallen about 20% so far this year, mirroring the S&P 500’s drop. The fund shed $19.7 million over this period.”
Fast forward to March, and Bloomberg had changed its tune. It reported that the fund of companies run by women-led CEOs or chairwomen was up 4.8% sice its launch, double the S&P 500.
I’ve written about women CEOs for several years – I first wrote about the subject in 2014. I’m convinced the companies they run make excellent bets for long-term investments.
Hypatia Capital was founded in 2007 by Patricia Lizarraga, a veteran merchant banker with over 25 years of experience. Since the company’s launch, she’s been focused on investing in women leadership. Lizarraga is the sole portfolio manager for WCEO.
The ETF looks to invest in the companies represented by the Hypatia Women CEO Index, which Hypatia created in 2021.
The companies within the index have market caps between $509 million and $171 billion. The companies held within each industry are equal-weighted, with the weightings of each industry replicating those in the FT Wilshire Small Cap Index. The industry weightings are rebalanced monthly.
Up less than 1% year-to-date (YTD), WCEO has dramatically underperformed the S&P 500. In a crowded ETF market, that doesn’t help its cause. However, I think this ETF can be successful in the long term.
Fidelity Women’s Leadership ETF (FDWM)
The final ETF managed by a woman is Fidelity Women’s Leadership ETF (NYSEARCA:FDWM).
I almost didn’t include the fund in my trio of women-led ETFs because while Nicole Connolly develops the investment strategy, Kenyon Hunt, a man, is responsible for the operational implementation of the strategy, which I assume includes stock selection.
I find it hard to believe Fidelity couldn’t get another woman to handle the task, but I’m not privy to their management decisions. However, moves like this likely discourage women from joining the boys’ club setting, that is, investment management. But I digress.
What is the strategy?
“Such companies include those that, at the time of initial purchase, (i) include a woman as a member of the senior management team, (ii) are governed by a board for which women represent at least one third of all directors, or (iii) in the Adviser’s opinion, have adopted policies designed to attract, retain and promote women.”
“Normally investing at least 80% of assets in equity securities of companies that prioritize and advance women’s leadership and development,” states the ETF’s summary prospectus.
So, while it’s focused on women in leadership, it’s not nearly as aggressive as WCEO in its investment strategy. Men can be the CEOs of each of its holdings and still qualify under the three points above. That, too, is hedging one’s bets.
In existence since June 2021, it has approximately the same net assets as WCEO, at $3.1 million. Performance-wise, it’s done much better in 2023, up nearly 14% YTD.
However, if you look at the sector weightings, they’re very similar to those of the S&P 500, which is up more than 19% YTD. At least with WCEO, you get industry weightings that differ significantly from the index.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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