Women are ditching leadership roles at the fastest rate on record. But one firm plans to enter the $6.34 trillion U.S. exchange-traded fund space with a wager that those who make it all the way to the top can give their companies an edge in hyper-competitive Corporate America.  

Hypatia Capital Management, a firm with a focus on female leadership and no assets under management as of August, is planning to launch the Hypatia Women CEO ETF (ticker WCEO). The proposed fund will invest only in companies led by female chief executive officers or whose boards have executive chairwomen, according to a filing with the Securities and Exchange Commission. 

The idea behind the ETF is that the obstacles women face in rising through the ranks of corporate America result in “extraordinary leadership characteristics,” fueling outperformance even when they’re at the helm, the filing says. WCEO is expected to launch in early January and will charge 0.75% in fees.

Existing ETFs focused on advancing gender diversity have struggled to lure investors and have performed largely in lockstep with the broader benchmark gauge this year. The $209.2 million SPDR SSGA Gender Diversity Index ETF (SHE), which is the largest of such funds, has fallen about 20% so far this year, mirroring the S&P 500’s drop. The fund shed $19.7 million over this period. 

“We’re building on the shoulders of a lot of work that’s already been done and we’re super grateful for it,” said Patricia Lizarraga, Hypatia’s founder and the portfolio manager for WCEO, who adds that she’s personally invested in SHE and the $31.7 million Impact Shares YWCA Women’s Empowerment ETF (WOMN). “But we think this is a real pure play in the market.”

A lack of awareness of the sheer number of women CEOs in the US sparked the decision to create the fund, Lizarraga said.

“I ask people, ‘do you know which are the five largest companies in the United States that are led by a woman?’ Most people can’t mention more than two,” she said.

Just 37 S&P 500 firms, or 7.4%, are led by a female CEO as of October 31, according to S&P Global Market Intelligence. And for every woman at the director level who gets promoted, two female directors are choosing to leave their company, a recent McKinsey & Co. and LeanIn.org report found. The organizations analyzed data from 12 million employees at more than 330 companies in the US and Canada.

The stock rout exacerbated by the Federal Reserve’s aggressive battle against inflation also makes it a “difficult” environment to launch a niche ETF, according to James Seyffart, a Bloomberg Intelligence ETF analyst. About 92% of ETFs have posted losses for the trailing 12 months, according to Bloomberg Intelligence data. 

“When this launches it will certainly be something to watch because if it starts meaningfully providing excess returns over the market, I could see it catching a lot of interest from the media and investors,” Seyffart said. 

This article was provided by Bloomberg News.