Financial Advisor contributor Paul Ellis recently interviewed Patricia Farrar-Rivas, the founding principal and CEO of Veris Wealth Partners, to discuss how advisors and investors are using funds that are focused on gender-lens issues in their long-term investment strategies.

Ellis: Patricia, Veris Wealth Partners participates in an ongoing study of the growth in gender-lens focused portfolios available to retail and institutional investors. Why has your firm made this a priority?

Farrar-Rivas: In my 24 years of focusing on sustainable and impact investing, gender lens investing is among the three most popular thematic approaches to constructing funds or portfolios. The other two are fossil fuel divest/invest and building low carbon portfolios.

There are conferences dedicated to gender lens investing before the industry has a significant number of portfolio offerings available to investors and advisors for implementing these strategies. With 15 funds currently available to investors, the demand for gender lens investing is ahead of the delivery of product choices with acceptable time frames of performance.

Advisors should be asking asset managers about their ability to add new funds focused on gender lens issues, whether they are active or passive in portfolio construction. This will make gender lens investing more accessible to retail and institutional investors.

Ellis: “The US SIF Sustainable, Responsible and Impact Investing Trends 2016” report released last November defines gender lens investing as a “focus on investment products or companies that actively support women’s socioeconomic advancement”. Tracking gender lens investing for the first time, the report identified $397 billion in professionally managed assets across asset classes that focus on this issue.

The report identifies appeal for gender lens investing among foundations, family offices, pension funds and individual investors focused on companies that help women advance in the workplace, and organizations that assist women living in communities that are underserved by the traditional banking system.

Farrar-Rivas: The 2016 Trends report data supports our experience that distribution channels for more product offerings are developing quickly as the demand from investors increases.

Ellis: Given the relatively small number of choices and short track records, how are advisors and investors using gender-lens focused funds in their long-term investment strategies?

Farrar-Rivas: There are multiple opportunities available on platforms where advisors have flexible account choices. Passively managed SMA accounts can be built to mimic available gender lens indexes. This approach can be part of a core global portfolio that includes equity and fixed-income solutions for individuals or institutions. Foundations and other mission-related investors can add other ESG sleeves to this kind of portfolio construction that are sector or environmentally thematic, for example.

Advisors who have lower minimum asset requirements for their clients can consider the active and passive mutual funds available. Most of the passive funds are large-cap U.S. or global in their fund construction and can be used as part of a diversified portfolio. The actively managed funds are generally proprietary to the platforms on which they are offered.

At Veris Wealth Partners, we have some clients that want a total gender-lens portfolio. This approach will include public as well as private equity and fixed-income opportunities. The portfolio might include private loan funds as well as individual public fixed-income securities. We want to have more products available for total portfolio solutions as the demand grows across our client base.   

Ellis: Patricia, please give our readers an example of a gender-lens themed fixed-income security that would be appropriate for the right investor client.

Farrar-Rivas: There are mortgage-backed bonds being issued on low-income housing facilities in some cities, which include health care and day care for the resident families and their single, working mother heads-of-household.

Ellis: What fund strategies are available today for including gender-lens themes in a client’s portfolio?

Farrar-Rivas: Many of the gender-lens thematic funds today are focused on leadership. They usually include mandates for the number of women board members, C-suite executives or managers at a firm. They look at which firms have workplace criteria around pay parity, mentoring ladders, opportunities for professional advancement and other benefits for women. Also, do the companies owned provide products and services that are positive for women and girls?

Many gender-lens investors also want some ESG metrics applied to a fund. The choices include index-based ETFs and SMA accounts for municipal, corporate and government bonds. There’s a global loan fund that targets their lending to support women farmers, and another that targets young female entrepreneurs. Single women with children struggle to get access to capital for small business development.

Gender-Lens Advocacy

Ellis: How does gender lens investing focus on shareholder engagement?

Farrar-Rivas: At Veris Wealth Partners, we engage with companies related to more gender-balanced leadership practices, from hiring to promotion from within the firm. We also ask companies to make their Department of Labor reports public so we can find out how they work with multiple gender-lens issues.

It’s always important for investors and their advisors to know what you own, but for gender-lens investors, it’s just as important to know who owns what you own. Investors should ask their advisors about diversity within the advisory practice as a starting point, given the many studies that have confirmed the performance value of workplace diversity over the past 10 years.

“How is diversity represented in your company?” is an important and smart question for investors to ask. “Who owns the flow of capital and how diverse is the flow of capital at this company?” is valuable investor information today.   

Ellis: What is your process for advocacy around these issues?

Farrar-Rivas: Where we begin today is to ask the questions and collect the data. We then use that data to decide what additional funds and managers can be added for balance related to issues like company leadership and workplace demographics. Gender diversity is also important related to who manages a fund’s portfolio.

We want to see the democratization of gender-lens investing so there are more choices across all categories, from SMAs to mutual funds to ETFs, with the capability of getting the research that applies from data providers like Bloomberg. It’s also important to see growth in the more traditional distribution channels, which is beginning to happen. 

Paul Ellis founded Paul Ellis Consulting to work with financial advisors who want to integrate sustainable and impact investment strategies for their clients.