ETF Focusing on Women-Run Companies Delivers Market-Beating Returns

March is Women’s History Month and March 8th was International Women’s Day. Occasions to be acknowledged to be sure, but with clients ever more sophisticated and demanding strategies that align with personal values, advisors need to be ready with relevant strategies.

In this case, “relevant strategies” extend beyond traditional environmental, social and governance (ESG) allocations to include more nuance fare such as gender lens investing.

“Gender Lens Investing is an impact investment strategy which deliberately integrates gender analysis into investment analysis and decision-making. It has garnered increased global attention in recent years, as investors seek to bring new dimensions to the nature of their investments,” according to KPMG.

Not only is gender lens investing relevant all year round, it’s increasingly accessible in fund form and has a history of delivering impressive returns.

Hypatia Women CEO ETF Compelling Option

Advisors looking to offer clients a gender lens idea via the exchange traded funds wrapper can consider the Hypatia Women CEO ETF (NYSEARCA: WCEO). The actively managed WCEO, which debuted in January, invests in companies led by female chief executive officers and its selection universe ranges from small- to mega-cap equities.

WCEO’s ability to include smaller stocks is relevant for numerous reasons, not the least of which is the point that just 41 companies, or less than 10%, of the large-cap S&P 500 are led by women. As an interesting aside, Hypatia Capial – WCEO’s issuer – is named for the Egyptian mathematician and philosopher.

“Hypatia Capital believes there should be more women at the helm of America’s largest corporations and in the investment management industry. We strive to make this a reality by focusing on investing in women in leadership in all asset classes.  We will not be satisfied until women are as well represented in the CEO suite as they are in the workforce overall,” according to the firm.

Of course, advisors want to know whether or not WCEO can deliver for clients and do so without severe concentration risk. On the latter point, the ETF’s largest holding commands just 2.27% of its weight and just three components are assigned weights in excess of 2%. As for performance potential, nothing is assured, but WCEO’s outlook is compelling.

“The fund is also expected to increase by another 19.7% over the next 12 months, according to the weighted average of analyst price targets of constituent stocks compiled by FactSet. The S&P 500 is expected to rise by 14%, FactSet data shows,” reports CNBC.

As of the end of 2022, the Hypatia Women CEO Index beat the Wilshire Small-Cap Index over the trailing five years.

WCEO Pragmatic Approach

As noted above, WCEO can does feature exposure to smaller companies, but that doesn’t mean the fund will be noticeably more volatile than other blend strategies. Nor does it mean the ETF is excessively allocated to speculative stocks. Some of its holdings include Occidental Petroleum (NYSE: OXY), Citigroup (NYSE: C), Oracle (NYSE: ORCL), UPS (NYSE: UPS) and Clorox (NYSE: CLX) – hardly speculative fare.

Bottom line: WCEO isn’t yet old nor large, but is a strategy that will resonate with a large swath of clients, indicating advisor attention here is merited.