Women CEOs: A gender-focused investment strategy that scores high on sustainability

Women CEOs: A gender-focused investment strategy that scores high on sustainability

Discover: Thematic exchange-traded funds are plentiful, with multiple investments across sectors and strategies to choose from. But a relatively new ETF plays on a specific gender-based theme: Women CEOs.

Inspire: Women who rise to the top of global corporations often have to overcome huge obstacles to do so and even more so to stay at the top.

Invest: If you think women are better at driving positive change than men, you can put your money to work along with your values. WCEO is traded on the NYSE Arca.

Stock view: With women CEOs still making up just 8% of S&P 500 boardrooms, contrarian investors don’t have to look far to find all-male investments.

Forty-one S&P 500 companies were led by female CEOs in 2023. While still only 8% of the total, the number of women in top executive roles has continued to grow, up from 30 just three years ago. They include powerhouses such as Oracle’s Safra Catz, Accenture’s Julie Sweet and Occidental Petroleum’s Vicki Hollub.

Those women are certainly making an impression in the corporate world. But can they also have a positive impact on your investment portfolio?

Patricia Lizarraga, managing partner of Hypatia Capital, believes that investing in women-led companies is a winning strategy. She is the portfolio manager for the Hypatia Women CEO ETF, an exchange-traded fund that tracks the Hypatia Women CEO Index, which consists of securities of U.S. companies that have a market capitalization of at least $400 million and are headed by a female CEO. officer.

“Our thesis is that women CEOs will be better. It is more difficult for them to find a job. But what they do is remarkable and we believe we have found a way to isolate that female factor,” Lizarraga wrote in a LinkedIn post. “Women promote more women, run more sustainable companies, and you probably don’t have them in your portfolio yet.”

Patricia Lizarraga, portfolio manager for ETF CEO Women.

Patricia Lizarraga, portfolio manager for ETF CEO Women

“How to isolate the female factor in investment? Including all US public companies with female CEOs, small to mega cap. All of them”, wrote Lizarraga. The female factor algorithm eliminates factors such as size or industry. We are left with the female factor which is the main determinant of performance.”

ETF CEO Women turned one in January. The fund is trading near $27.50 per share, up about 8.5% from its debut in January 2023. It paid a small dividend at the end of 2023, yielding just under 1%. The expense ratio is 0.85%. The fund has just $3.3 million in assets. See also: Matching the right investors with the most important sustainability projects.

Liizarraga hopes that after passing its one-year limit, which allows her to talk about the fund’s returns in addition to its sustainability characteristics, the fund will be able to grow as it gains recognition.

“Female CEOs are beginning to attract their dedicated fan bases by making their presence felt in the investment landscape,” she said. A recent study by Korn-Ferry noted that firms with female CEOs saw a 20% increase in share price momentum, a measure of positive price trend, compared to their male counterparts in the first 24 months of to the incumbent leaders, she pointed out.

While WCEO is not an ESG fund, it rates highly on Morningstar’s Sustainalytics measures, she said, outperforming the largest ESG ETF in the small-cap investment category.

“But what makes the fund really stand out is its role in catalyzing tangible transformation,” she said. “By investing in companies that are truly committed to gender equality and female leadership, investors exercise their financial power to actively drive change.”

“Hypatia Capital’s thesis is that this approach allows investors to be integral in driving change, enabling them to influence corporate cultures and practices without being hindered by political or economic barriers.”

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