Investing in women’s empowerment and opportunities is something portfolio managers Julianne McHugh and Miki Behr have talked about doing for years. Now that idea has become a reality. BNY Mellon Women’s Opportunities ETF , the exchange-traded fund they manage, launched Wednesday, trading under the ticker BKWO. It joins a small but growing group of funds that focus on opportunities for women in the workplace. The BNY Mellon Investment Management product not only includes companies that embody best practices for gender equity, it also includes those that provide products and services that support women in their daily lives, Behr explained. The latter can be health-oriented products or childcare providers. “The objective is to invest in companies that are being thoughtful, that are moving from a one-size-fits all kind of approach to drive economic opportunity and growth,” she said. The actively managed fund is launching with $10 million in assets under management and has a management fee of 50 basis points, or half a percentage point. Its top holdings include Microsoft, Amazon and Eli Lilly. Investing for financial return while promoting gender diversity, known as gender lens or gender equity investing, isn’t new. For instance, the Pax Ellevate Global Women’s Leadership Fund debuted in 1993, the SPDR MSCI USA Gender Diversity ETF in 2016 and the Impact Shares YWCA Women’s Empowerment ETF in 2018. Yet it is an idea that has gained steam in recent years, although it still represents a small slice of the investment pie, according to Morningstar. Assets in U.S. gender equity funds have doubled over the last three years, to $1.3 billion, as of the end of February, Morningstar found. Those funds represent less than 0.01% of total equity fund assets in the United States, according to the firm. The last fund that launched was the Hypatia Women CEO ETF earlier this year, which invests only in companies led by women. Diversity means better performance McHugh and Behr said the Covid-19 pandemic also helped push things to the forefront. Women left the workforce in droves , either from job cuts or to manage childcare during school closures. Women’s labor participation rate fell to levels not seen since 1988, according to the National Women’s Law Center. “In this post-pandemic environment, where there’s a lot of signals that could raise some concerns with regards to our outlook for economic growth, let alone our social well-being, there was this opportunity to create a product … to address the economic and the social gaps that limit women, which ultimately also reduced economic productivity and gender equity,” McHugh said. If women’s participation rate in the labor market matched that of men, it could add as much as $28 trillion to global annual gross domestic product by 2025, a report by McKinsey & Company in 2015 found . Research also shows that gender diversity boosts a company’s financial performance. For instance, S & P 500 companies with at least 25% female executives have a higher subsequent one-year return on equity than the rest of those in the index, according to Bank of America. The same goes for those that have more than one-third of women on the board. In addition, companies in the top quartile of gender diversity on executive teams were 25% more likely to experience above-average profitability than peer companies in the fourth quartile, according to a 2019 analysis by McKinsey & Company. “Companies that are doing a better job crafting policies — recruiting, retaining, and developing their talent — are going to have just a bigger and better pool to draw from when they’re filling their management positions,” said Behr, a 15-year veteran at BNY Mellon. “That will drive returns. These companies are going to make better decisions that will allow them to outperform, and so we believe that’s where the growth is going to come from.” Fundamentals matter The firm aggregates several different data sources and works with its fundamental research team to dig into what’s happening within the company culture and its productivity, as well as the company’s overall fundamentals. “It’s about generating the positive outcomes and the positive returns,” McHugh said. “We’re investors who are trying to get positive returns, but we’re realizing that there’s also an opportunity for some positive outcomes to close the gender gaps that exist today.” They are also not just targeting female investors, although bringing more into investing would be a great bonus. According to a global survey by BNY Mellon, which helped drive interest in forming the fund, there would be at least an additional $3.2 trillion in assets under management from private individuals if women invested at the same rate as men. The survey also found that more than half of women are interested in impact investing. “We designed a strategy for anyone who wants to seek long-term, stable growth. That said, we are recognizing there is an opportunity to engage women more in investing,” said McHugh, who came to BNY Mellon five years ago after 14 years at Boston Company Asset Management. “Women are motivated to invest in those [companies] that are aligned with their personal values, so we’re hopeful that this would be something that they would feel more attracted to.” Getting women in the door The firm is also giving back, donating at least 10% of management fees to Girls Inc., a nonprofit that helps empower girls. “There’s a lot that the companies we work with can do. But we also have to help empower these women to get to their door. And we believe investing in education can support the efforts to do so,” Behr said. With the fund offerings in the space still small, the pair are excited to add to its growth. “It’s really exciting that there are so many funds that are being launched specifically at this area. I think the more attention we can bring here, the better,” Behr said. “[A] rising tide lifts all ships.” “You have seen a lot more funds coming up in assets and attention,” McHugh added. “Attention drives results.”
