The SPDR SSGA Gender Diversity Index ETF (SHE) made quite a splash when it debuted in 2016.
Seeded with $250 million by the California State Teachers Retirement System, known as CalSTRS, it was one of the largest exchange-traded fund launches at the time and helped bring the environmental, social and governance theme to greater prominence in the ETF industry. SHE was designed to invest in companies with a high proportion of women in senior leadership roles, and fund constituents must have at least one woman on its board or as CEO. Nearly 80 percent of its portfolio comprises U.S. large-cap stocks.
The fund officially attained a three-year track record as of March 7, which makes it a good time to ask how well SHE has done both as an investment and as an ETF with a mission.
The results are mixed.
The fund is up 9.5 percent year-to-date, with a one-year gain of 4.5 percent. SHE’s three-year annualized return is 12.3 percent. Comparatively, the SPDR S&P 500 Trust ETF (SPY) is up 10 percent year-to-date. SPY’s one-year return is 2.8 percent, and its three-year gain is 13.3 percent. From a purely mercenary standpoint, investors would've done better with SPY during the past three years, especially considering its expense ratio of 9 basis points is 11 basis points cheaper than SHE. But that's not entirely the point when it comes to investing in SHE.
“We've been very pleased with the reception that it has received in the marketplace with the ability to highlight stewardship in a very meaningful way,” says Sue Thompson, head of SPDR Americas distribution at State Street Global Advisors.
Thompson says SHE has helped to encourage dialog around ESG investing, and that State Street is having more conversations with financial advisors on this theme. Furthermore, she adds, State Street in the past three years has reached out to more than 1,200 companies that did not have any women on the board, and now more than 400 of them have added a woman to their board.
Competition
SHE was the only gender diversity-focused ETF until the Impact Shares YWCA Women's Empowerment ETF (WOMN) debuted last August. Impact Shares, the fund’s sponsor, works with the YWCA in selecting which companies belong in the index. They use 19 criteria to determine a gender equity score including gender balance in leadership, equal pay and work/life balance, and policies promoting gender equality.
ESG investing is still relatively new in the ETF world, and many funds under this umbrella don’t have long track records. Ethan Powell, CEO of Impact Shares, says ESG investing needs to start evolving from simply outcome-oriented metrics to commitments that empower people.