New Trend Toward Women-Focused Funds

New Trend Toward Women-Focused Funds

A Bloomberg Brief special issue Women in Finance was published on October 12th. Authors Darshini Shah and Laura Colby take a closer look at the trend of fund managers  using “metrics based around women” to choose firms for their portfolios.

In the report on women-focused funds, Patricia Lizarraga, managing partner and founder of Hypatia Capital, argues investing in companies managed by female execs with a diverse management team is an ideal strategy that has proven to generate strong returns. Zineb Guessous, managing partner at Almena Partners and special adviser at StoneWater Capital, also discusses how women at the top can help mentor less experienced women in finance.

Making money with women-focused funds

U.S. Trust in Boston is a part of a growing segment of the money-management business that believes when it comes to investing, gender is a big deal. The key argument, which is supported by research, is that firms with a relatively high percentage of women in decision-making capacities tend to perform better than those managed almost solely by men.

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The first European women-focused fund Valeurs Feminines, was launched in 2005 by Conseil Plus Gestion, a small money-management firm based in France. The portfolio strategy involves European firms with a high percentage of senior female managers or whose business has “a strong female connotation,” notes Jean-Louis Hostache, the chief exec of CPG.

Holdings as of the end of June for VF included advertiser Publicis Groupe SA, whose chairman and six of 15 directors are female, and insurer Axa SA, where the COO and five of 14 board of directors members are women. That said, the Valeurs Feminines team also holds stakes in firms such as Etam Developpement SA, a lingerie seller that is up almost 25% over the last 12 months.

“We thought it would be a shame not to profit from the increasing economic power of women,” Hostache comments. Shah and Colby highlight that Valeurs Feminines has beaten the Eurostox 50 (its benchmark), by more than 70% since its founding, and it has produced an 8.8% return year to date.

Women-Focused Funds – Ellevate

Another strategy is employed at the three-year-old Pax Ellevate Global Women’s Index Fund, which is managed by a joint venture of Pax World Management and Ellevate Asset Management (founded by ex-Bank of America and Citigroup exec Sallie Krawcheck). The Pax Ellevate portfolio is chosen from firms with women directors and top managers who have signed (or will sign) the United Nations Women’s Empowerment Principles accord. Their portfolio currently includes close to 400 stocks from the MSCI Index, notes Joe Keefe, president and CEO of Pax World.

Pax Ellevate’s top 10 holdings include names such as Key Corp., Pepsico and defense contractor Lockheed Martin Corp., and all currently have a woman at the top of the ladder. Of note, the fund does not include a Japanese firm, and tech companies like Apple and Facebook with a high percentage of male employees are also not represented. The fund has beaten its benchmark (MSCI Index) so far this year.

The Bloomberg report notes that while female-focused funds are still almost all relatively small (under $100 million in AUM), the sector is expected to enjoy strong growth as the trend toward socially responsible investing picks up steam worldwide.

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