January 3, 2017 • Jerilyn Klein Bier
The term “gender lens investing,” first used back in 2009, isn’t receiving as many blank stares as it did in its early days. But even investors who’ve heard of it may not realize, based on its name, that it incorporates multiple lenses. A gender lens often looks at investments by taking into account target companies’ policies toward females. How many women are in a company’s C suite? How many are on its corporate board? Has the company closed the gender pay gap? Offered mentoring or career advancement to women—with family leave and other gender-based initiatives? In other cases, a gender lens means making sure companies protect the women in their supply chains from human rights abuses. Or it refers to microfinance and community development investment vehicles that directly benefit women and girls. No matter the specific focus, the movement has been attracting more assets, products and shareholder attention, and it’s likely to have staying power. “There is a business case as well as a social case for looking at gender as a metric,” says financial advisor and portfolio manager Eve Ellis, co-founder of the Matterhorn Group at Morgan Stanley in New York City and co-manager of one of the industry’s first gender lens investing strategies. Such approaches are expected to find an audience among the fastest-growing pool of potential new clients—women and millennials. Studies show women are outliving men and controlling more wealth, says Ellis. Women are aligning values with investing more than they used to and millennials are doing it more so than past generations. Money is already pouring into gender-focused vehicles. According to a joint analysis from Veris Wealth Partners and the nonprofit investor network Women Effect, gender lens assets under management in public equity and public debt have grown fivefold since 2014, reaching $561 million as of June 30, 2016. Half the assets were in State Street Global Advisors’ Gender Diversity Index ETF, which was launched in March 2016 and seeded with an initial $250 million from the California State Teachers’ Retirement System (CalSTRS). There were 15 public market “gender lens investing” equity and debt products in June, up from nine in 2014. The Pax Ellevate Global Women’s Index Fund and Community Capital Management hold the next largest pieces of the pie, according to the analysis. The State Street and Pax Ellevate funds invest in companies with gender-diverse boards and executive management. Community Capital Management invests in bonds that finance community development initiatives, many of which help women and girls improve their lives. Gender-lens tools are also surfacing. The Bloomberg Financial Services Gender-Equality Index (BFGEI), launched in May, provides data on companies’ gender statistics, employee policies, gender-conscious product offerings and engagement. In September, Morgan Stanley rolled out a tool kit to help advisors use gender diversity criteria in their investment portfolios. January will mark the fourth anniversary of the Matterhorn Group’s Parity Portfolio, a gender lens strategy for managed accounts that invests in U.S.-based companies with at least three women on their boards. “I am a feminist,” says Ellis. “This is in my DNA.” But it was the compelling financial data that prompted her and Matterhorn co-founder Nikolay Djibankov to launch the strategy. What really spoke to Ellis was a 2011 report on Fortune 500 companies from the nonprofit group Catalyst, an organization that promotes inclusiveness. The study found that those companies with three or more women on their boards for at least four out of five years outperformed those with none. Such companies had a 46% higher return on equity, a 60% higher return on invested capital and an 84% higher return on sales. Credit Suisse, McKinsey & Company, Ernst & Young, Harvard University and others have also found strong correlations between women on boards and corporate financial strength. At this point, “I feel as though you can count on one hand the number of companies that haven’t done the research,” she says. The Matterhorn Group selects 25 to 30 companies for its Parity Portfolio by conducting fundamental and qualitative analysis—examining the consistency of profitability and valuations, management strength, adaptability and other factors. The strategy’s universe of investable companies has grown from 250 to more than 350 as boards have added female directors. “We want that number to be 6,000 companies or 10,000 companies, so we have work to do,” says Ellis. “Any chance I get, I talk to CEOs to say this is what we’re doing and this is what’s important.” Ellis is also a member of two organizations that promote diversity on corporate boards: the Thirty Percent Coalition and 2020 Women on Boards. And she’s on the steering committee of the 30% Club, which aims to improve the gender balance within companies. Beyond The Boards To enable clients to invest more broadly in gender and diversity, the Matterhorn Group recently rolled out a discretionary strategy called the Diversity & Inclusion Strategy. It’s based on the Thomson Reuters Diversity & Inclusion Index, which launched in September and ranks 100 companies across 24 metrics including their percentage of women employees and managers, the employees’ satisfaction, their flexible working hours and the companies’ day care services. New York City-based Cornerstone Capital Group, a financial services firm majority-owned by CEO Erika Karp and certified by the Women’s Business Enterprise National Council, also looks for investments that “move beyond counting the number of women on boards and instead focus on all aspects of a company’s commitment to diversity,” says Jennifer Leonard, Cornerstone’s director of manager due diligence. First « 1 2 » Next
The term “gender lens investing,” first used back in 2009, isn’t receiving as many blank stares as it did in its early days. But even investors who’ve heard of it may not realize, based on its name, that it incorporates multiple lenses. A gender lens often looks at investments by taking into account target companies’ policies toward females. How many women are in a company’s C suite? How many are on its corporate board? Has the company closed the gender pay gap? Offered mentoring or career advancement to women—with family leave and other gender-based initiatives? In other cases, a gender lens means making sure companies protect the women in their supply chains from human rights abuses. Or it refers to microfinance and community development investment vehicles that directly benefit women and girls. No matter the specific focus, the movement has been attracting more assets, products and shareholder attention, and it’s likely to have staying power. “There is a business case as well as a social case for looking at gender as a metric,” says financial advisor and portfolio manager Eve Ellis, co-founder of the Matterhorn Group at Morgan Stanley in New York City and co-manager of one of the industry’s first gender lens investing strategies. Such approaches are expected to find an audience among the fastest-growing pool of potential new clients—women and millennials. Studies show women are outliving men and controlling more wealth, says Ellis. Women are aligning values with investing more than they used to and millennials are doing it more so than past generations. Money is already pouring into gender-focused vehicles. According to a joint analysis from Veris Wealth Partners and the nonprofit investor network Women Effect, gender lens assets under management in public equity and public debt have grown fivefold since 2014, reaching $561 million as of June 30, 2016. Half the assets were in State Street Global Advisors’ Gender Diversity Index ETF, which was launched in March 2016 and seeded with an initial $250 million from the California State Teachers’ Retirement System (CalSTRS). There were 15 public market “gender lens investing” equity and debt products in June, up from nine in 2014. The Pax Ellevate Global Women’s Index Fund and Community Capital Management hold the next largest pieces of the pie, according to the analysis. The State Street and Pax Ellevate funds invest in companies with gender-diverse boards and executive management. Community Capital Management invests in bonds that finance community development initiatives, many of which help women and girls improve their lives. Gender-lens tools are also surfacing. The Bloomberg Financial Services Gender-Equality Index (BFGEI), launched in May, provides data on companies’ gender statistics, employee policies, gender-conscious product offerings and engagement. In September, Morgan Stanley rolled out a tool kit to help advisors use gender diversity criteria in their investment portfolios. January will mark the fourth anniversary of the Matterhorn Group’s Parity Portfolio, a gender lens strategy for managed accounts that invests in U.S.-based companies with at least three women on their boards. “I am a feminist,” says Ellis. “This is in my DNA.” But it was the compelling financial data that prompted her and Matterhorn co-founder Nikolay Djibankov to launch the strategy. What really spoke to Ellis was a 2011 report on Fortune 500 companies from the nonprofit group Catalyst, an organization that promotes inclusiveness. The study found that those companies with three or more women on their boards for at least four out of five years outperformed those with none. Such companies had a 46% higher return on equity, a 60% higher return on invested capital and an 84% higher return on sales. Credit Suisse, McKinsey & Company, Ernst & Young, Harvard University and others have also found strong correlations between women on boards and corporate financial strength. At this point, “I feel as though you can count on one hand the number of companies that haven’t done the research,” she says. The Matterhorn Group selects 25 to 30 companies for its Parity Portfolio by conducting fundamental and qualitative analysis—examining the consistency of profitability and valuations, management strength, adaptability and other factors. The strategy’s universe of investable companies has grown from 250 to more than 350 as boards have added female directors. “We want that number to be 6,000 companies or 10,000 companies, so we have work to do,” says Ellis. “Any chance I get, I talk to CEOs to say this is what we’re doing and this is what’s important.” Ellis is also a member of two organizations that promote diversity on corporate boards: the Thirty Percent Coalition and 2020 Women on Boards. And she’s on the steering committee of the 30% Club, which aims to improve the gender balance within companies.
Beyond The Boards To enable clients to invest more broadly in gender and diversity, the Matterhorn Group recently rolled out a discretionary strategy called the Diversity & Inclusion Strategy. It’s based on the Thomson Reuters Diversity & Inclusion Index, which launched in September and ranks 100 companies across 24 metrics including their percentage of women employees and managers, the employees’ satisfaction, their flexible working hours and the companies’ day care services. New York City-based Cornerstone Capital Group, a financial services firm majority-owned by CEO Erika Karp and certified by the Women’s Business Enterprise National Council, also looks for investments that “move beyond counting the number of women on boards and instead focus on all aspects of a company’s commitment to diversity,” says Jennifer Leonard, Cornerstone’s director of manager due diligence.
Please log back in before proceeding.
There was an error logging in. Please try again.
Congrats! You are now logged in. Your exam is being submitted.