A ???Gender ETF??? Is Well-Timed -- WSJ
December 04 2017 - 3:03AM
Dow Jones News
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
reports@wsj.com.
(END) Dow Jones Newswires
December 04, 2017 02:48 ET (07:48 GMT)
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