A new Exchange Traded Fund is taking the next step with gender diversity investing. The Hypatia Women CEO ETF (WCEO) is the first ETF to focus strictly on women-run companies.
The only two requirements for a company be owned in WCEO are that it has a market cap of at least $500 million and a woman runs the company, either from the CEO or Chairperson position.
WCEO will have at least 80% of its assets in US companies that female Chief Executive Officers lead. Furthermore, the fund may invest up to 20% of holdings in US companies with an Executive Chairperson or a Chairperson who is female.
WCEO is a one-of-a-kind ETF, but it does have some competition if an investor is looking for a woman-focused ETF.
The Impact Shares YWCA Women’s Empowerment ETF (WOMN) tracks an index of large and mid-cap US equities selected and weighted to maximize exposure to firms that score highly on gender diversity.
WCEO has an expense ratio of 0.85% and just began trading in January. WOMN has an expense ratio of 0.75%, has been trading for about four years, and has over 200 holdings. Year-to-date, the fund is up 4.7%, down 12.41% over the last year, but up 11.83% annualized over the previous three years.
Another ETF focusing on women in the workforce is the SPDR MSCI USA Gender Diversity ETF (SHE). SHE tracks a market cap-weighted index of large and mid-size US companies that promote gender diversity through a relatively high proportion of women throughout all levels of their organization.
SHE has been trading for about seven years and has an expense ratio of 0.20%, the best out of this group. Year-to-date SHE is up 3.88%, down 14.48%, but up 2.53% annualized over the last three years and 4.82% annualized over the previous five years.
While each of these three ETFs promotes the idea of gender diversity in the workplace, WCEO has taken it to the next level, and I believe the requirement for a company to be run by a woman will set this ETF apart from the rest over the next few years.
I feel WCEO is a good buy because, over the last few years, we have continued to get more evidence indicating that women are better leaders than men. One recent example of this is the Covid pandemic, in which women-run countries managed the crisis better. Another study showed that US states with women governors had fewer people die than states with male governors.
A study on leadership performed by Jack Zenger and Joseph Folkman found that women were rated more competent on every level of leadership than men. This study used 360 assessments to evaluate the effectiveness and get an accurate result.
If you aren’t yet sold, this may help push you over the edge. As of May 2022, 32 companies in the S&P 500 were led by women. If we look at the performance of those 32 companies compared to the rest of the S&P 500 over the past ten years, the results are the female lead companies rose 384% compared to just a 261% increase by the male lead businesses.
Let me leave you with one more thought. There is a story about Billy Beane, the manager of the Oakland A’s baseball team and a key figure in the movie “Moneyball.” If you recall, in the film, Billy Beane went out and found players that didn’t necessarily appeal to the scouts because of their physical appearance or something as small as the way they threw a baseball, say, sidearm.
Apparently, this way of thinking was how he made stock picks. The story goes that he would buy stocks based on how the CEO looked. He would only invest in companies that did not have a tall white male CEO.
It is said that he thought some, or even most, tall white men gained respect and where eventually promoted to CEO because of their physical appearance, not because of their ability. Billy Beane wanted a CEO that gained their position because they earned it based on skill and business knowledge.
So if you want to invest like Billy Beane, or ‘Moneyball’ investing, try out the new ETF WCEO and invest with the women.
Matt Thalman
INO.com Contributor
Follow me on Twitter @mthalman5513
Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
