The Smart Investment

I’m a big proponent of gender equality.

Because I’m a woman, right?

Um, sure. But mostly because I’m an investor.

Smart investing is a men’s and a women’s issue.

The best investments stem from opportunities that many overlook. It helps to intentionally push yourself to widen your lens, to look for patterns across completely different experiences. When I find an interesting thesis, and I see it supported by data and research, I consider it a viable investment strategy.

For example, my global travels showed me the opportunities and importance of investing in international developed and emerging markets. It’s backed up by all kinds of investment research. For the last two decades, my international exposure has been drastically higher than those suggested by the average financial advisor (a good thing).

Similarly, two decades as a female investment executive make gender inequality in the workplace something hard for me to ignore. I have all the same stories women of all professions share– being talked over or lambasted for sharing a different opinion, or trying to “roll with” a demeaning or sexist remark. I remember each episode word for word. In each memory, I notice I was the sole woman in the room. I’m not sure any of the men even noticed the offense.

On the other hand, I experienced the tangible benefits of improved gender balance. My favorite memories are team meetings with robust brainstorming, honest opinion sharing, and conclusive decision-making. They were literally fun! Most importantly, they were the precursors to the launch of successful new business initiatives. When I replay those memories, I see a more gender balanced room.

Perhaps these are coincidences. Perhaps my brain is cherry-picking examples. But my anecdotes are echoed by countless others.

But anecdotes aren’t enough. There’s data and research.

  • Leading research firms like Catalyst and McKinsey have released numerous reports on the economic benefits of gender equality.
  • Then there’s the research by the major investment industry players–MSCI, Credit Suisse, Morgan Stanley— citing that companies with more gender diverse boards and management teams exhibit higher returns on capital, greater innovation and productivity, and higher employee retention.
  • Ironic given the dearth of funding to female entrepreneurs in Silicon Valley, there are studies from groups like First Round Capital showing that companies with at least one female founder outperform and are more capital-efficient than their all-male peers.

With women now controlling over half of personal wealth in the U.S. (and growing) and making 80% of consumer purchasing decisions, female viewpoints in the creation of products and services are a necessity.

Gender equality in the workplace isn’t just the right thing to do. It’s the smart thing to do. 

So much so that Gender Lens is an investment strategy.

Gender lens investing is the deliberate incorporation of gender factors into investment analysis and decision-making. It can include choosing to emphasize companies with more gender-diverse boards and management teams, or to fund top-notch female-owned businesses; it can be emphasizing companies whose products and services improve the lives of women and girls.

Applying a gender lens helps identify the companies who grasp the opportunity, and uncover the potential risks of those that don’t. There’s even a book written on the financial strategy of Gender Lens Investing.

And there are a host of investment options.

Easily accessible ones include State Street Global Advisors’ Gender Diversity Index ETF (SHE) and the Pax Ellevate Global Women’s Index Fund (PXWIX).

There are fixed income and micro-finance lending strategies, and a mushrooming number of private equity and venture capital firms making investments with a gender lens. Finally, there are investing networks like Golden Seeds, Plum Alley, Portfolia and SheEO, which each take different approaches to investing in female-led companies.

Given my corporate experience, I was most interested in investing in leading companies with more women in senior leadership ranks.

So why wasn’t I doing it?

My answer? I was busy.

I’m embarrassed over the lameness of this excuse. Seriously, who isn’t busy?

As I describe in The Investing Circle, I’ve been busy studying impact investing and considering how to implement my version of impact across my own portfolio. My focus has been East Africa. Because most of these investments are private or angel investments combined with advisory roles, it’s a bit more time intensive.

But there I was, a seasoned investment professional, missing out on the opportunity to invest consistent with my beliefs in the largest segment of my portfolio– U.S. large cap equities.

Believing the U.S. large cap market is very efficient, I invest in an S&P index based strategy through Aperio Group. Using analytics, Aperio constructs a portfolio that looks and feels like the S&P 500, but with only 100-150 holdings.

It’s efficient, cheap, and tax-smart; Aperio can harvest capital losses in my individual holdings throughout the year, which I can use to offset capital gains from other investments come April 15.

And as a quantitative index manager, they can easily customize portfolios to all kinds of preferences.

Could they manage my account in a gender lens strategy?

Their answer: “Of course!”

Aperio’s Women Inclusion strategy excludes companies that don’t have at least one woman on their board or in their executive ranks, and avoids companies that derive 10% or more of their revenue from adult entertainment. It also value scores companies based on mostly self-reported criteria (percentage of women on boards and senior management, equal opportunity, and human rights).

They literally sent me a menu; if I wanted to order exclusions– based on environmental or social criteria, or by citing specific companies or industries—I could do so. If I wanted to engage in shareholder advocacy around women’s inclusion initiatives, I could do that, too.

I chose to go with the baseline Women’s Inclusion strategy. I can always dial up my criteria at a later date.

My portfolio will continue to look and feel like the S&P 500. But I’ll get to those same returns via a better path.

Money is power. I’m a believer in putting my money where my mouth is. With this move, I feel like I just served up a main course towards investing with my values.

To me, gender equality isn’t a question. Moving towards it is the number one thing we can do to maximize the productivity of our workforce.

Achieving it is going to take concerted efforts of our governments, companies and individuals—both men and women.

I can’t control most of those efforts. But I can control my own. I can make smart investments.

And so can you.

For the most comprehensive resources on Gender Lens Investing, see Resources & Books or Gender Lens Investing Resources

3 Comments

  1. Diana McDonough said:

    Jodie – I don’t know anything about investing but clearly you do. This was a really impressive article. – Diana

    September 2, 2017
    Reply
    • jodimorris.sf@gmail.com said:

      Thank you Diana!

      September 3, 2017
      Reply
  2. Brukty said:

    Refreshing! I look forward to meeting you in person soon! Brukty

    September 7, 2017
    Reply

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