In 2016, State Street Global Advisors made a splash when it introduced an exchange-traded fund aimed at fostering gender diversity in the workplace.

Seeded with $250 million by the California State Teachers’ Retirement System (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.

The SPDR SSGA Gender Diversity Index ETF (SHE) was designed to invest in companies with a high proportion of women in senior leadership roles. Its constituent companies had to have at least one woman on their boards or in CEO roles. Nearly 80% of the fund’s portfolio is U.S. large-cap stocks.

The fund had officially attained a three-year track record as of March 7, which made 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 was up 11% year to date as of mid-March, with a one-year gain of 4.7%. SHE’s three-year annualized return was 12.1%. By comparison, the SPDR S&P 500 Trust ETF (SPY) was up 12.6% year to date. SPY’s one-year return was 3.6%, and its three-year gain was 13.8%. From a purely mercenary standpoint, investors would’ve done better with SPY during the past three years, especially considering that its expense ratio of 9 basis points is 11 basis points cheaper than SHE’s.

But that’s not entirely the point when it comes to investing in a gender-diversity fund. “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, president of SPDR Americas distribution at State Street Global Advisors.

Thompson says SHE has helped to encourage a dialogue about 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 their boards, and now more than 400 of those boards have one.

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. “[We need] to get more creative and find the sort of data and data analytics that show which traits are most highly correlated with having a natural outcome of women and people of color in leadership positions,” he says.

SHE and WOMN have both similarities and significant differences. SHE recently had assets under management of $252 million and an expense ratio of 20 basis points. It is a large-cap, market-weighted fund. For the sector breakdown, SHE has health care in the top spot at 19%, financials at 15% and consumer cyclicals at 14%. Johnson & Johnson is the top holding, at 9%, with both Home Depot and Mastercard at 5%.

WOMN tracks the Morningstar Women’s Empowerment Index comprising large- and mid-cap U.S. equities. It had $4 million in assets and an expense ratio of 76 basis points.

Through mid-March, WOMN was up 12.7%. Impact Shares uses the Russell 1000 Index for its benchmark, and the fund that closely tracks that index—the iShares Russell 1000 ETF (IWB)—was up 12.9%. The ETF Research Center’s fund overlap tool shows that the WOMN portfolio has a 96% overlap with IWB and an 87% overlap with SPY. The overlap between SPY and SHE is 51%.

Seed Money Depleted

Assets under management in the SHE fund were north of $350 million as of August, but it has since lost about $100 million. Perhaps part of that can be attributed to equities hitting the skids in the fourth quarter. But a large part of it probably resulted from a large institutional investor that withdrew a huge chunk of its money from the fund.

According to Thompson, that institutional investor decided “to manage the money in-house according to [the SHE fund’s underlying] index, as opposed to investing in the fund itself.” Although Thompson declined to name the manager, it was likely CalSTRS. In a 13G filing, CalSTRS’ investment in SHE stood at $236 million as of January 11 according to filing tracker WhaleWisdom.

As reported in a story from Dow Jones Newswires, CalSTRS had begun the process of redeeming its $236 million investment in SHE when it withdrew $120 million in early February. A CalSTRS spokeswoman said in an e-mail that it doesn’t discuss individual transactions and wouldn’t confirm the figure in the Dow Jones Newswires story. The spokeswoman said the plan was to eventually bring the SHE seed money back in-house.

“CalSTRS’ investment in the index was under management by State Street, but had always been slated to transition back to CalSTRS as part of our broader initiative to manage 60% of our assets in-house,” the spokeswoman said. “We have a continuous need to explore and explore aggressively every possible strategy for improving our performance, and quite simply, diversity, it’s just good business.”

Regardless of the CalSTRS situation, Thompson says having a three-year track record will make it easier for fiduciaries to start recommending SHE. The fund started with institutional support, she notes, but now much of its support is coming at the individual level. In addition, the ETF is starting to be included in model portfolios.

Powell says WOMN has been slow to gather assets. But part of that might be because of its inauspicious launch just ahead of the fourth-quarter market correction, which made it tough to raise assets. Impact Shares’ model is unique because it is a 501(c)(3) nonprofit organization, and it gives all its net profits after advisory fees to the YWCA.

Thompson notes that while there has been greater interest in ESG investing and continued progress in getting more women on corporate boards, there’s more work to be done. “We still have a lot of companies that have zero women on their boards or maybe just one woman,” she says. “We know that it takes more than one woman on a board to actually start to effectuate the type of change that makes the difference in the bottom line.”