A 'Gender ETF' Is Well-Timed -- WSJ
By Gerrard Cowan
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 4, 2017).
Can an exchange-traded fund change America's boardrooms? That's part of the thinking behind SPDR SSGA Gender Diversity Index ETF (trading symbol SHE), a $368 million fund that has gained 18% so far this year.
Research shows that gender-diverse companies perform better overall, says Lynn Blake, chief investment officer of global equity beta solutions at State Street Global Advisors, the money manager behind the fund. For example, a 2015 MSCI study found that companies with at least three female board members have a better return on equity.
The SHE fund, launched in March 2016, aims to provide similar returns to the overall market, while also promoting gender diversity. It tracks an SSGA-created index that selects stocks from the 1,000 largest U.S. companies, depending on the gender diversity of their boards and senior leadership.
The ETF weights its investments by choosing companies that have the greatest gender diversity within a respective sector. This allows the fund to minimize significant sector biases, says Ms. Blake. Otherwise, there would be significant skews toward certain industries because some, such as energy, have far less gender diversity than other sectors, such as consumer staples and health care, she says.
Similar ETFs were recently launched outside of the U.S. In September, Evolve North American Gender Diversity Index ETF (HERS) began trading in Canada, followed by Lyxor Global Gender Equality ETF (ELLE) in Europe in November. Both funds track indexes from Germany's Solactive index provider.
The goal is to encourage companies to change the makeup of their boards, as well as their senior-leadership profile, says Ms. Blake.
SSGA issued guidance at the start of the year on its gender-diversity expectations for the 3,500 companies in which it invests on behalf of clients in the U.S., Australia and the U.K. It then screened these companies through the first half of the year and found that 476 didn't meet its guidance. State Street has said it had positive discussions with 42 of the companies, including seven that changed the composition of their boards as a result. At the same time, the firm has said it voted against the re-election of directors at 400 companies this year because they didn't take steps to add women to boards.
The asset manager recently expanded the policy on gender diversity to include Japan and Canada. "A strong, effective board can truly only be effective if it has good diversity," Ms. Blake says.
Mr. Cowan is a writer in Northern Ireland. He can be reached at email@example.com.
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December 04, 2017 02:48 ET (07:48 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.