March 8 is International Women's Day, and on March 7, the SPDR SSGA Gender Diversity Index ETF (NYSE: SHE) celebrated its third anniversary.
SHE, one of the first exchange traded funds to emphasize gender equality investing principles, has been successful and is now home to about $350 million in assets under management.
SHE follows the SSGA Gender Diversity Index. That benchmark “seeks to minimize variations in sector weights compared to the composition of the index's broader investment universe by focusing on companies with the highest levels within their sectors of senior leadership gender diversity,” according to State Street.
Also known as “gender lens investing,” gender equality investing principles and strategies have been around awhile, but have received renewed attention in recent years.
“One of the fast-growing parts of sustainable investing is so-called gender-lens investing, which integrates gender-based factors, either to improve returns or to promote more gender equality,” reports Barron's. “There have been a number of investment product introductions around the world recently; expect more.”
Why It's Important
SHE is home to 169 stocks and one of the fund's primary objectives is to provider exposure to companies “that demonstrate greater gender diversity within senior leadership than other firms in their sector,” according to State Street.
Scores of data points and research suggest that brands and companies with women in pivotal roles, including C-level executive roles, outperform their less diverse rivals.
“In 2016, the Credit Suisse Research Institute issued a report that supported gender diversity’s improvement of business performance,” according to a 2018 report by Cambridge Associates. “Analyzing companies where women occupied 50% or more of the leadership positions, Credit Suisse found that sales growth, earnings per share growth, and return on assets were all higher than for the broad universe of companies, and that debt/equity levels were lower.”
Health care and financials services stocks combine for almost 34 percent of SHE's weight. The fund's weight to financial services companies, its second-largest sector exposure, is relevant because various studies prove women are often better investors and portfolio managers than men.
“In 2015, Morningstar reviewed the ten-year performance record of nearly 8,000 mutual fund portfolio managers (PMs),” according to Cambridge Associates. “Only 9.4% were women, and of those, only 37 women had a ten-year continuous track record. Women exclusively managed 1.9% of all assets across all funds; they also co-managed, as part of a team, 24.1% of all assets. Morningstar discovered that the performance record of funds managed exclusively by women rivals that of men.”
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