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Women CEOs: A gender-focused investment strategy that scores high on sustainability

Women CEOs: A gender-focused investment strategy that scores high on sustainability

Discover: Thematic exchange-traded funds abound, with sector and strategy investments galore to choose from. But one relatively new ETF plays on a specific gender-based theme: Women CEOs.

Inspire: The women who rise to the top of global corporations often have to overcome immense obstacles to do so and even more so to stay on top.

Invest: If you think that women are better at driving positive change than men, you can put your money to work along with your values. WCEO is traded on the NYSE Arca.

Equities view: With women CEOs still making up only 8% of the S&P 500 boardrooms, contrarian investors don’t have to look very hard to find men-only investments.

Forty-one S&P 500 companies were helmed by women CEOs in 2023. While still only 8% of the total, the number of women in the top executive role has continued to climb, up from 30 just three years ago. They include powerhouses such as Oracle’s Safra Catz, Accenture’s Julie Sweet and Occidental Petroleum’s Vicki Hollub.

Those women are certainly making an impression on the corporate world. But can they also have a positive impact on your investment portfolio?

Patricia Lizarraga, managing partner of Hypatia Capital, believes that investing in women-led companies is a winning strategy. She is the portfolio manager for the Hypatia Women CEO ETF, an exchange-traded fund that tracks the Hypatia Women CEO index, which consists of equity securities of U.S. companies that have market capitalizations of at least $400 million and are led by a female chief executive officer.

“Our thesis is that women CEOs will outperform.  It is harder for them to get the job.  But the ones that do are extraordinary, and we believe we have found a way to isolate that female factor,” Lizarraga wrote in a LinkedIn post. “Women promote more women, run more sustainable companies, and you probably don’t have them in your portfolio yet.”

Patricia Lizarraga, portfolio manager for the Women CEO ETF.

Patricia Lizarraga, portfolio manager for the Women CEO ETF

“How do we isolate the female factor in investing? By including all American public companies with women CEOs, small to mega cap.  All of them,” Lizarraga wrote.  The female factor algorithm eliminates factors such as size or industry.  We are left with the female factor being the overriding determinant of performance.”

The Women CEO ETF turned a year old in January. The fund is trading near $27.50 a share, up about 8.5% from its debut in January of 2023. It paid a small dividend at the end of 2023, yielding just under 1%. The expense ratio is 0.85%. The fund has just $3.3 million in assets. See also: Matching the right investors to the most important sustainability projects.

Liizarraga hopes that having passed its one-year mark, which allows her to talk about the fund’s returns in addition to its sustainability characteristics, the fund will be able to grow as it gains recognition.

“Female CEOs are starting to attract their own devoted fan bases by making their presence felt on the investment landscape,” she said. A recent Korn-Ferry study, noted that firms with female CEOs saw a 20% increase in stock price momentum, a measure of positive price trend, compared to their male counterparts in the executives’ first 24 months in office, she pointed out. 

While WCEO is not an ESG fund, it rates high on Morningstar’s Sustainalytics measures, she said, outscoring the largest ESG ETF in the small-blend investing category.

“But what makes the fund truly stand out is its role in catalyzing tangible transformation,” she said. “By investing in companies that are truly committed to gender equality and female leadership, investors exercise their financial power to actively drive change.”

“Hypatia Capital’s thesis is this approach allows investors to be integral to driving change, enabling them to influence corporate cultures and practices without being hamstrung by political or economic obstacles.”