Investment

Gender Lens Investing: A Sector Analysis

Gender lens investing in each mounted earnings and equities developed in response to proof that firms with increased women-in-leadership (WIL) metrics outperformed on a spread of monetary and share value standards.

This correlation between WIL metrics and superior efficiency was first demonstrated in 2007 research from Catalyst and research by Credit Suisse and Merrill Lynch, amongst others, made related observations.

The primary publicly traded gender lens equity funds available to individual investors include mutual funds, exchange-traded funds (ETFs), SICAVs, one exchange-traded note (ETN), and one unit trust. Divided into 6 global equity funds and 13 regional funds, these funds as a bunch totaled $1.49 billion in property underneath administration (AUM) as of 30 September 2019, with the United States, Canada, and the United Kingdom leading the way in terms of country allocation.

What does the AUM-weighted sector distribution of this asset class appear to be? Monetary providers is the highest sector allocation, adopted by info know-how, client staples, client discretionary, and well being care. The accessible information on the highest 10 holdings for these funds signifies info know-how and monetary providers are the highest holdings, with distributions of 10% and 9%, respectively. This implies a level of sector allocation by design.


Gender Lens Funds: AUM-Weighted Sector Allocations

Financials 18.34%
Data Know-how 15.01%
Client Staples 10.90%
Client Discretionary 9.81%
Well being Care 8.75%
Industrials 7.02%
Communication Providers 6.08%
Utilities 4.63%
Supplies 4.09%
Power 3.95%
Actual Property 2.53%
Different 0.81%
N/A 2.69%
Money 5.39%
Complete 100%

Supply: Parallelle Finance


Among the many financials showing within the high 10 holdings throughout the entire group of funds, there are 9 banks, three insurance coverage firms, and one asset administration agency.


Gender Lens Funds: High Monetary Providers Holdings (As of 30 September 2019)

Firm* GICS Business Nation
Aon Insurance coverage United Kingdom
Financial institution of America** Banks United States
Financial institution of Montreal Banks Canada
Financial institution of Nova Scotia Banks Canada
Brookfield Asset Mgmt Capital Markets Canada
HSBC Holdings Banks United Kingdom
JP Morgan Chase** Banks U.s.
Principal Monetary Group Insurance coverage United States
Progressive  Insurance coverage United States
Royal Financial institution of Canada** Banks Canada
Toronto-Dominion Financial institution Banks Canada
U.S. Bancorp Banks United States
Wells Fargo Banks United States

* In alphabetical order; ** In Equileap Top Global 100

Supply: Parallelle Finance


Nobody sector has emerged because the chief in WIL, pay parity, or any of the opposite measures that monitor girls’s progress within the office. However monetary providers is a curious sector chief for gender lens shares. Why? As a result of a transparent lack of WIL development within the house has been extensively documented because the monetary disaster.

In the US and different developed economies, women constitute roughly half of all monetary providers workers. However within the high 20 world companies, girls made up solely 18% of government committees in 2018, up from solely 13% in 2014. Amongst S&P 500 firms as a complete, women make up 26.5% of government and senior-level positions.

Progress is especially caught in some locales. Regardless of a strong monetary providers sector, only 3 of 50 Swiss monetary establishments have girls CEOs.

In the US, 33% of monetary advisers are girls, however solely 12.5% of Fortune 500 CFOs are as of 2016. Inside monetary providers, ladies and men begin out in equal numbers on the entry degree, however girls maintain a smaller share of C-suite positions than the already-low US common for all industries. The representation of women of color drops precipitously with every step up the ladder, and they’re particularly scarce on the high rungs.

Furthermore, monetary providers has the broadest wage gap in the United States. At the same time as they account for at the very least half of all workers within the sector, girls earn simply $0.63 for each $1 that males make. In the UK, the primary yr of mandated pay parity disclosures confirmed that asset managers had a gap of 31%, which is greater than the common 28% hole within the monetary providers sector general. Some fund managers really noticed the hole widen in the course of the second yr of required reporting.

Within the face of this ongoing inequality, the gender lens sector and high holdings information point out rising WIL progress amongst banks and insurers, a development additionally highlighted by latest analysis. Equileap, a number one supplier of gender lens indexes, lately issued its annual global ranking of firms by gender equality. The survey discovered that financials rating poorly as a complete, however that some within the sector are going towards the grain, together with 36 of the worldwide high 100 firms.

Financial institution of America, a gender lens high holding, scored highest amongst all US firms. Mirvac, an Australian REIT and up to date high 10 holding, achieved the very best rating in Asia-Pacific. Of the 36 monetary providers companies recognized by Equileap, solely three are among the many gender lens high 10 holdings. Amongst these 36 are 13 Australian firms, 5 from Scandinavia, and 4 from France. This means a transparent geographical disconnect with the present high gender lens financials and suggests extra alternatives for gender lens investing, significantly for actively managed shares, in monetary providers.

In an surroundings the place no sector is making huge leaps in WIL metrics, why is monetary providers the highest sector weighting for gender lens funds? Is that this a mismatch? Would possibly different sectors be dominated out resulting from environmental, social, and governance (ESG) standards and different screens? Or does this replicate rising WIL management in banking and insurance coverage? Will this development proceed and broaden to different components of the sector? Most significantly, will gender lens funding in financials assist girls all through the sector?

These points bear watching as this younger asset class evolves.

For extra evaluation from Marypat Smucker, CFA, go to Parallelle Finance.

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All posts are the opinion of the creator. As such, they shouldn’t be construed as funding recommendation, nor do the opinions expressed essentially replicate the views of CFA Institute or the creator’s employer.

Picture credit score: ©Getty Photos /Westend61


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Marypat Smucker, CFA

Marypat Thenell Smucker, CFA, is a author and analysis analyst with a deal with gender lens and environmental, social, and governance (ESG) investing. Her work might be discovered at Parallellefinance.com.

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