Jason Baron uses an unusual metric for sizing up stocks: women.
From his perch at U.S. Trust in Boston, Baron works in a small but growing part of the money-management business that’s trying to sell the idea that when it comes to investing, gender pays. The basic argument, backed up by research, is that companies with a relatively high percentage of women in power perform better than those dominated by men.
Traditionalists may scoff, but many of the half-dozen or so women-focused funds and investment strategies -- a tiny slice of the $6.6 trillion socially responsible investing world -- have been standout performers. Baron’s Women & Girls Equality strategy, offered to private banking clients, outperformed its benchmark in 2013 and 2014, though it’s slightly under so far this year. Several global mutual funds with a similar emphasis were bringing in double-digit returns until the recent market swoon.
Whether concentrating on women, the environment or human rights, a socially responsible approach provides a way to match money with conscience. But for many, the question is whether so- called gender-lens investing is about making a difference or a profit: At least one female-focused fund doesn’t even pretend it’s picking stocks to promote women in management, instead looking at companies that make products mostly women buy, such as cosmetics.
Millennials’ Interest
Managers including Baron and Eve Ellis, who runs Morgan Stanley’s Parity Portfolio, say they’re winning converts with their approaches. They point to a decade’s worth of studies, notably McKinsey & Co.’s first Women Matter report in 2007, that suggest there’s money to be made in stocks of companies with a lot of women in top jobs. When gender-lens stock picking is done the right way, Ellis says, “you don’t need to sacrifice financial returns for social returns.”
Millennials are helping drive the general trend, with 70 percent saying they’d be likely to make investments based on social issues, such as gender equality, according to a 2013 study by Calvert Investments Inc. And U.S. Trust data show that 71 percent of high net-worth women consider socially responsible criteria when deciding where to put their money.
“It’s not just the Birkenstock-wearing Colorado liberals anymore,” says Jackie Vanderbrug, a senior vice president at U.S. Trust; a version of its Women & Girls portfolio for wealthy clients is available for a minimum $100,000 investment through parent Bank of America Corp.’s Merrill Lynch.
‘A Stretch’
Most of the funds try to capture the types of returns the McKinsey report says women in leadership roles can bring. But in South Korea, UBS Hana’s She&Style concentrates on companies that make “products appealing to female consumers,” including cell phones and makeup.