{"id":2860,"date":"2022-03-18T16:06:28","date_gmt":"2022-03-18T16:06:28","guid":{"rendered":"http:\/\/blog.valuengine.com\/?p=2860"},"modified":"2022-03-18T16:09:00","modified_gmt":"2022-03-18T16:09:00","slug":"etfs-for-gender-lens-investing","status":"publish","type":"post","link":"http:\/\/blog.valuengine.com\/index.php\/etfs-for-gender-lens-investing\/","title":{"rendered":"ETFs for Gender-Lens Investing"},"content":{"rendered":"

Last Tuesday was International Women’s Day.\u00a0 For the eighth straight year Women in ETFs, the standard bearer for promoting gender bias reform in the ETF industry, held bell-ringings and special programs around the world to commemorate the occasion.\u00a0 There have been a number of research studies demonstrating examples that having female representation in the C-Suite, on boards, and in decision-making roles helps to identify companies with better returns on equity. \u00a0 In many cases, offering investment returns that are superior to those that do not do so.\u00a0\u00a0<\/span><\/p>\n

All of the approximately 5,000 stocks, 16 sector groups, 140 industries, and 500 ETFs have been updated on\u00a0<\/b>www.ValuEngine.com<\/b><\/a><\/h5>\n
Free Two Week Trial to all 5,000 plus equities and ETFs covered by ValuEngine\u00a0<\/b>HERE<\/b><\/a><\/h5>\n

A study I authored in 2019 demonstrated that companies that implemented extensive programs to hire and train military veterans also produced superior investment returns in subsequent periods, especially during market downturns.\u00a0 One of the most salient arguments as to why diversity and inclusion (D & I) has evidently produced better downside risk control is that it mitigates against corporate groupthink and forces more contingency risk discussions.\u00a0 It may well be that D & I is not only good policy, but also a solid corporate investment.\u00a0 More statistical research would be needed before declaring diversity and inclusion a validated \u201csmart beta\u201d factor.\u00a0 Eventually, despite the skeptics, gender diversity may well garner official recognition.<\/span><\/p>\n

Accordingly, using information from FactSet Analytics Insight made available through ETF.com, let\u2019s look at the four ETFs promoting gender diversity and inclusion:<\/span><\/p>\n

Current ValuEngine reports on these ETF\u2019s can be viewed\u00a0<\/b>HERE<\/b><\/a><\/h5>\n

WOMN<\/b>, Impact Shares YWCA Women’s Empowerment ETF \u2013 Impact Shares teamed with the YWCA of Metropolitan Chicago, Morningstar Indexes and Equileap to develop the ETF.\u00a0 The Rockefeller Foundation was an initial primary seeder using funds from its Zero Gap Portfolio.\u00a0 <\/span>WOMN<\/b> looks to capture the performance of US large- and midcap stocks of companies that are empowering to women, with risk and return characteristics similar to the index\u2019s large- and midcap equity universe. The fund\u2019s ESG research provider considers four factors to calculate a gender diversity score for each eligible firm: gender balance in leadership and workforce, equal compensation and work life balance, policies promoting gender equality, and commitment, transparency, and accountability to women\u2019s empowerment. <\/span>WOMN<\/b>\u2019s index uses an optimization algorithm to select a portfolio of about 200 companies with the highest scores, while maintaining marketlike risk and return. Additionally, companies involved in serious ethical controversies or certain industries (such as weapons, gambling, or tobacco) are excluded from the index.<\/span><\/p>\n

SHE, <\/b>SPDR SSGA Gender Diversity ETF – SHE seeks out companies that employ women in high-level leadership roles. The fund evaluates the 1000 largest US firms for the ratio of women on the board of directors and in executive positions (defined as Senior VP or higher). Companies ranking in the top 10% in each sector are included in the portfolio, with the caveat that each firm must have at least one woman on its board or as CEO. Firms are selected by sector and weighted by market cap with an individual capping weight of 5%. Launched in March 2016, SHE’s performance shouldn’t depart radically from the broad market.<\/span><\/p>\n

FDWM, <\/b>Fidelity Women\u2019s Leadership ETF – FDWM is an ETF version of a mutual fund Fidelity made available years earlier. The fund seeks to identify high-performing global stocks that prioritize and advance women\u2019s leadership and development. Such firms should (i) include a woman as a member of the senior management team, (ii) have women directors comprising at least one-third of the board, or (iii) in the opinion of the fund adviser, have adopted policies designed to attract, retain and promote women. To select securities, the fund adviser looks for companies committed to female leadership and development that can grow earnings and have resilient business models with a solid competitive position. FDWM utilizes an active approach in a non-transparent structure. It only discloses its full holdings monthly, with a 30-day lag. A \u2018tracking basket\u2019 is published daily on its website, in place of the actual portfolio.<\/span><\/p>\n

EQUL,<\/b> IQ Engender Equality ETF – EQUL focuses on companies that promote gender equality. Starting with an index universe of 1000 US large-caps, the fund initially screens out companies that are involved in certain controversial activities: unconventional fossil fuels, nuclear energy, weapons, norms-based research, and other controversial businesses. Additionally, companies identified to be engaged in unethical business practices for the past two years are also excluded. Remaining firms are then scored and ranked based on four gender diversity factors: gender balance in leadership & workforce, equal compensation & work life balance, policies promoting gender equality, and commitment, transparency & accountability. The fund\u2019s concentrated portfolio consists of 75 firms with the highest scores.<\/span><\/p>\n

Of the above funds, only <\/span>SHE <\/b>and <\/span>WOMN <\/b>have ValuEngine ETF reports available. <\/span>EQUL <\/b>has insufficient history and <\/span>FDWM <\/b>is characterized by FactSet Analytics as a nontransparent fund, meaning that the names of the stocks it currently holds are not available.\u00a0 Two benchmarks are included to evaluate these funds, <\/span>ESGU, <\/b>iShares ESG Aware MSCI USA ETF with more than $23 billion under management along with <\/span>SPY, <\/b>SPDR S&P 500 ETF Trust.\u00a0\u00a0<\/span><\/p>\n

We also include the MSCI ESG Fund Rating provided on ETF.com reports. The MSCI ESG Fund Rating measures the resiliency of portfolios to long-term risks and opportunities arising from environmental, social, and governance factors.\u00a0 It is an indicator of how well an ETF meets comprehensive ESG objectives.\u00a0 The comparative data are included in the following table.<\/span><\/p>\n

Current ValuEngine reports on these ETF\u2019s can be viewed\u00a0<\/b>HERE<\/b><\/a><\/h5>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
<\/td>\nWOMN<\/b><\/td>\nSHE<\/b><\/td>\nFDWM<\/b><\/td>\nEQUL<\/b><\/td>\nESGV<\/b><\/td>\nSPY<\/b><\/td>\n<\/tr>\n
ValuEngine Rating<\/span><\/td>\n3<\/b><\/td>\n4<\/b><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\n3<\/b><\/td>\n3<\/b><\/td>\n<\/tr>\n
MSCI ESG Score<\/span><\/td>\n7.9<\/span><\/td>\n7.9<\/span><\/td>\n8.9*<\/i><\/b><\/td>\n8.2<\/span><\/td>\n8.7<\/span><\/td>\n7.8<\/span><\/td>\n<\/tr>\n
Start Date<\/span><\/td>\nFeb-17<\/span><\/td>\nMar-16<\/span><\/td>\nJun-21<\/span><\/td>\nOct-21<\/span><\/td>\nDec-16<\/span><\/td>\nJan-1993<\/span><\/td>\n<\/tr>\n
VE Forecast 6-mo. Price Change<\/span><\/td>\n+1.9%<\/span><\/td>\n+2.8%<\/b><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\n+2.0%<\/span><\/td>\n+2.0%<\/span><\/td>\n<\/tr>\n
VE Forecast 1-yr. Price Change<\/span><\/td>\n-2.6%<\/span><\/td>\n-2.4%<\/b><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\n-2.6%<\/span><\/td>\n-2.8%<\/span><\/td>\n<\/tr>\n
Historic 1 mo. Price Change<\/span><\/td>\n-5.3%<\/span><\/td>\n-7.3%<\/span><\/td>\n-2.9%<\/b><\/td>\n-4.2%<\/span><\/td>\n-5.2%<\/span><\/td>\n-4.6%<\/span><\/td>\n<\/tr>\n
Historic 3 mo. Price Change<\/span><\/td>\n-14.5%<\/span><\/td>\n-15.8%<\/span><\/td>\n-8.2%<\/span><\/td>\n-3.9%<\/b><\/td>\n-12.2%<\/span><\/td>\n-10.8%<\/span><\/td>\n<\/tr>\n
Historic 1-Yr. Pr. Change\u00a0<\/span><\/td>\n+1.6%<\/b><\/td>\n-10.8%<\/span><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\n+4.0%<\/span><\/td>\n+6.7%<\/span><\/td>\n<\/tr>\n
Historic 5-Yr Ann. Pr. Change\u00a0<\/span><\/td>\n13.0%<\/b><\/td>\n6.5%<\/span><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\n12.8%<\/span><\/td>\n12.3%<\/span><\/td>\n<\/tr>\n
Volatility<\/span><\/td>\n18.9%<\/span><\/td>\n18.0%<\/b><\/td>\n19.9%<\/span><\/td>\n17.5%<\/span><\/td>\n16.6%<\/span><\/td>\n15.9%<\/b><\/td>\n<\/tr>\n
Sharpe Ratio\u00a0<\/span><\/td>\n0.7<\/b><\/td>\n0.4<\/span><\/td>\nN\/A<\/span><\/td>\nNA<\/span><\/td>\n0.8<\/span><\/td>\n0.8<\/span><\/td>\n<\/tr>\n
Beta<\/span><\/td>\n0.99<\/b><\/td>\n1.09<\/span><\/td>\n1.18<\/span><\/td>\n1.18<\/span><\/td>\n1.02<\/span><\/td>\n1.00<\/span><\/td>\n<\/tr>\n
# of Stocks<\/span><\/td>\n201<\/span><\/td>\n194<\/span><\/td>\n99<\/span><\/td>\n77<\/span><\/td>\n321<\/span><\/td>\n500<\/span><\/td>\n<\/tr>\n
Undervalued by VE %<\/span><\/td>\n57%<\/span><\/td>\n62%<\/b><\/td>\nN\/A<\/span><\/td>\nN\/A<\/span><\/td>\n51%<\/span><\/td>\n53%<\/span><\/td>\n<\/tr>\n
P\/B Ratio<\/span><\/td>\n4.2<\/span><\/td>\n4.5<\/span><\/td>\nN\/A<\/span><\/td>\n4.0<\/b><\/td>\n4.7<\/span><\/td>\n4.7<\/span><\/td>\n<\/tr>\n
P\/E Ratio<\/span><\/td>\n22.8<\/b><\/td>\n32.7<\/span><\/td>\nN\/A<\/span><\/td>\n30.8<\/span><\/td>\n25.4<\/span><\/td>\n25.5<\/span><\/td>\n<\/tr>\n
Div. Yield<\/span><\/td>\n3.6%<\/b><\/td>\n0.8%<\/span><\/td>\nN\/A<\/span><\/td>\n1.9%<\/span><\/td>\n1.1%<\/span><\/td>\n1.4%<\/span><\/td>\n<\/tr>\n
Expense Ratio<\/span><\/td>\n0.75%<\/span><\/td>\n0.20%<\/b><\/td>\n0.59%<\/span><\/td>\n0.45%<\/span><\/td>\n0.15%<\/span><\/td>\n 0.09%<\/span><\/td>\n<\/tr>\n
Assets (AUM)<\/span><\/td>\n$35 MM<\/span><\/td>\n$244 MM<\/span><\/td>\n$3 MM<\/span><\/td>\n$6 MM<\/span><\/td>\n$23.4 Billion<\/span><\/td>\n$385.7 Billion<\/span><\/td>\n<\/tr>\n
Active or Indexed<\/span><\/td>\nIndexed<\/span><\/td>\nIndexed<\/span><\/td>\nActive<\/span><\/td>\nIndexed<\/span><\/td>\nIndexed<\/span><\/td>\nIndexed<\/span><\/td>\n<\/tr>\n
ETF Sponsor<\/span><\/td>\nImpact Shares<\/span><\/td>\nSPDR by SSgA<\/span><\/td>\nFidelity<\/span><\/td>\nIQ Shares by NYLIM<\/span><\/td>\niShares by Blackrock<\/span><\/td>\nSPDR by SSgA\u00a0<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
Financial Advisory Services based on ValuEngine research available: \u00a0\u00a0<\/b>www.ValuEngineCapital.com<\/b><\/a><\/h5>\n

Key Observations:<\/b><\/p>\n

    \n
  1. Since all four ETFs have similar objectives of emphasizing stocks faring best in a series of metrics reflecting the best opportunities for women in decision-making roles, people not familiar with all aspects of indexing methodologies might expect about a 50% or more agreement in the top 10 holdings of each.\u00a0 However, since the devils are always in the details, only American Express (<\/span>AXP) <\/b>is in all four ETFs.\u00a0 Salesforce.com (<\/span>CRM), <\/b>Accenture <\/span>(ACN) <\/b>and Coca-Cola <\/span>(KO) <\/b>are all present in three of the all four ETFs even though <\/span>KO<\/b> has been hit with recent criticism from the ESG community for water usage and treatment issues.<\/span><\/li>\n
  2. In terms of portfolio composition, <\/span>WOMN <\/b>has the highest average market cap and <\/span>EQUL <\/b>has the lowest large cap and the highest midcap exposure.\u00a0 All four underweight the tech sector relative to <\/span>SPY <\/b>with <\/span>EQUL <\/b>giving it the lowest rating.\u00a0 <\/span>SHE <\/b>has more than four times the weight of <\/span>SPY <\/b>Consumer-Discretionary category with Disney <\/span>(DIS)<\/b>, NIKE <\/span>(NKE) <\/b>and NETFLIX <\/span>(NFLX) <\/b>all in its top ten. All four qualify as true ESG funds with higher MSCI ESG ratings than <\/span>SPY.<\/b> FDWM<\/b> has the best MSCI ESG rating of the group (shown in italics with an asterisk in the table since it is based on the last published holdings of the fund from the prior quarter) with 8.9\/10; <\/span>EQUL, <\/b>the newest fund, has an MSCI ESG rating of 8.2\/10, better than the 7.9 posted by both <\/span>WOMN <\/b>and <\/span>SHE.\u00a0 <\/b>The fact that <\/span>FDWM <\/b>has such a high rating rings similarly to our recent blog on environmentally sustainable ETFs and comments by Jessica Ferringer in ETF.com.\u00a0 The flexible nature of active management combined with daily portfolio oversight may give active ESG ETFs an edge in lowering or removing holdings suffering negative ESG events not yet factored in by the data providers.<\/span><\/li>\n
  3. SHE<\/b> has $244 Million in AUM making it the largest ETF fitting the category by a wide margin.\u00a0 In 2017, <\/span>SHE<\/b> was recognized by ETF.com at its awards ceremony as the most important launch of the prior year. It preceded the launch of <\/span>ESGU, <\/b>now the AUM leader in the ESG ETF space, by nine months.\u00a0 California teacher pension fund CalSTRS helped develop the fund\u2019s methodology based on volumes of research by groups such as McKinsey and Catalyst; CalSTRS also provided most of its preliminary seed investment.\u00a0 <\/span>SHE <\/b>has been described as \u201cWhere Gender Diversity and Smart Beta Meet.\u201d\u00a0 Until the past 12-month period of dreadful underperformance, <\/span>SHE <\/b>had lived up to that billing, having beaten the S&P 500 since inception.\u00a0 What a difference a year makes!\u00a0\u00a0<\/span><\/li>\n
  4. WOMN<\/b>, second in AUM, posted superior performance to <\/span>SHE <\/b>in all four of the historical time periods measured in the table.\u00a0 In fact, its annualized 5-year performance was a healthy 13%, 70 basis points (0.70%) better than <\/span>SPY, <\/b>the S&P 500 standard-bearer that is the oldest and largest US ETF.\u00a0<\/span><\/li>\n
  5. FDWM <\/b>is<\/span> one of several actively managed mutual funds now made available from Fidelity Investments in the more modern and efficient ETF structure, albeit a nontransparent design. In its ETF form, it has only been in existence nine months but has the best one-month and ranks second in three-month performance amongst the entire group.\u00a0 <\/span>This is just conjecture but the fund\u2019s lack of daily constituent transparency may be one reason contributing to its dearth of AUM.\u00a0 Institutional ESG-aware investors don\u2019t want to discover too late that one of the undisclosed holdings was the stock of a company the investment board might find objectionable.<\/li>\n
  6. EQUL <\/b>weathered the past three-month maelstrom far better than its peers.\u00a0 It endured just a 3.9% decline while placing second in one-month decline.\u00a0 New York Life Investments just rebranded their ETFs, formerly Index IQ, as IQ.\u00a0\u00a0<\/span><\/li>\n<\/ol>\n

    An issue with ESG ETFs in general but especially those with diversity-and-inclusion objectives is how the proxies are voted.\u00a0 <\/span>WOMN <\/b>and all of its sister ETFs offered by Impact Shares have very ESG-focused proxy-voting guidelines.\u00a0 SPDRs has general policies on ETF proxy voting with added guidelines for <\/span>SHE.\u00a0 <\/b>As far as I could determine from fund literature and the web, <\/span>EQUL <\/b>and <\/span>FDWM <\/b>have no proxy voting guidelines specific to ESG or D & I issues.\u00a0 Sadly, this usually means voting proxies with male-dominated management teams that are \u201cold school\u201d more often than not.\u00a0\u00a0<\/span><\/p>\n

    An interesting new alternative is <\/span>VOTE, <\/b>the first of two ETFs offered by California Hedge Fund Activist <\/span>Engine No. 1.\u00a0 VOTE <\/b>\u00a0is an index fund mimicking a broad-based US benchmark maintained by Morningstar Indexes.\u00a0 Its distinction is having extensive ESG-conscious proxy voting guidelines. The ETF division\u2019s CEO and CIO are both women, Jennifer Grancio and Yasmin Bilger respectively.\u00a0 During the last 10 years, most constructive corporate improvements in ESG-related practices have come as a result of two-types of efforts: regulatory\/legal engagement and corporate engagement.\u00a0 <\/span>VOTE <\/b>gives investors a tangible way to get involved in influencing companies proactively.\u00a0 It also has the best MSCI ESG rating of the group.\u00a0 That rating is shown in italics with an asterisk in the table since it is based on the last published holdings of the fund from the prior quarter.\u00a0 Regarding investment returns and risks, <\/span>VOTE <\/b>is slightly less concentrated than <\/span>SPY <\/b>in accessing an ETF for a fund\u2019s US Large Cap Core allocation.\u00a0 Hence, investment performance statistics will be very similar.<\/span><\/p>\n

    Financial Advisory Services based on ValuEngine research available: \u00a0\u00a0<\/b>www.ValuEngineCapital.com<\/b><\/a><\/h5>\n

    Regarding performance recommendations of the four gender-focused ETFs in the analysis: They are based on industry research findings that superior work environments supporting women in decision-making roles lead to superior corporate performance and investment returns.\u00a0 In fact, <\/span>WOMN <\/b>has better historical performance than <\/span>SHE <\/b>and has only a slightly lower forecast for future performance.\u00a0 After outperforming from inception through the first two months of 2020 <\/span>SHE <\/b>endured a miserable last twelve months of performance and <\/span>WOMN <\/b>has performed much more in-line with, and more recently has held up better, than <\/span>SPY.\u00a0 <\/b>That said, <\/span>SHE <\/b>is projected by ValuEngine models to outperform the market during the next six-to-twelve months with a rating of 4 as opposed to a 3 (market performer) for <\/span>WOMN.\u00a0 <\/b>\u00a0I believe both to be fine choices now for diversion of core index money as they are well-diversified portfolios similar in risk composition to the S&P 500 with better ESG-risk composition and a bit less exposure to the tech sector.\u00a0 Actively managed <\/span>FDWM <\/b>and equally weighted <\/span>EQUL <\/b>are both intriguing and both outperformed <\/span>WOMN <\/b>and <\/span>SHE <\/b>during the past 3 months.\u00a0 Both, in my opinion, have more potential to outperform major indexes significantly.\u00a0 However, the small AUM figures and lower trading volumes along with very short histories will likely force many potential investors to wait another quarter or two before committing assets.\u00a0 Allocations to <\/span>WOMN <\/b>and <\/span>SHE<\/b> might be more prudent at this time.<\/span><\/p>\n

    By\u00a0Herbert Blank<\/a><\/p>\n

    Senior Quantitative Analyst, ValuEngine Inc<\/p>\n

    www.ValuEngine.com<\/a><\/p>\n

    support@ValuEngine.com<\/a><\/p>\n

    _______________________________________________<\/p>\n

    All of the approximately 5,000 stocks, 16 sector groups, 140 industries, and 600 ETFs have been updated on\u00a0<\/b>www.ValuEngine.com<\/b><\/a><\/h5>\n
    Financial Advisory Services based on ValuEngine research available through\u00a0<\/b>ValuEngine Capital Management, LLC<\/b><\/a><\/h5>\n
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    Subscribers log in\u00a0<\/b>HERE<\/b><\/a><\/h5>\n","protected":false},"excerpt":{"rendered":"

    Last Tuesday was International Women’s Day.\u00a0 For the eighth straight year Women in ETFs, the standard bearer for promoting gender bias reform in the ETF industry, held bell-ringings and special programs around the world to commemorate the occasion.\u00a0 There have been a number of research studies demonstrating examples that having female representation in the C-Suite, … Read more<\/a><\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[130,1,39],"tags":[1979,1980,1812,1760,1761,1719,1978,1731,1938,1977,1726,1762,28,1656,1531,1659,1976],"_links":{"self":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2860"}],"collection":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/comments?post=2860"}],"version-history":[{"count":3,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2860\/revisions"}],"predecessor-version":[{"id":2863,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/2860\/revisions\/2863"}],"wp:attachment":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/media?parent=2860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/categories?post=2860"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/tags?post=2860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}