A wealth of research demonstrates that companies with higher levels of women in leadership (WIL) report superior performance across a range of measures. Based on WIL and other gender equity criteria, the 29 gender equality funds (GLEF) available to individual investors include 13 global equity funds and 16 regional equity offerings. As of March 31, 2021, the assets under management of the GLEF group amounted to 3.28 billion dollars.
Along with global equities, these funds generally generated single-digit gains for the three-month period ended March 31, 2021, with several double-digit bottoms. Year-over-year absolute returns were strongly positive for the global and regional equity segments. Relative performance for the two periods was mixed.
Amid the nascent economic recovery, financials is the largest AUM-weighted GICS sector allocation for the group as of March 31, followed by information technology. These sectors have traded the top allocation spot for the GLEF group over the past two years.
No sector scored above 50% to achieve equality, according to the 2020 “Global Report and Ranking on Gender Equality” by Equileap, which provides gender scores on a global dataset of the top 3,700 public companies. Sector scores were in a small range of 31% to 39%, with information technology taking last place. Persistent gender inequality in tech companies is not a new phenomenon and has been widely documented.
Tech stocks turn in a softer quarter
Over the past two calendar years, the biggest technology and technology-related stocks have generated broad market returns. This trend slowed during the first quarter, with the S&P 500 Information Technology NTR Index lagging the S&P 500 Index. Seven of the largest technology providers are known as FANGMAN stocks: Facebook, Apple, NVIDIA, Google (Alphabet), Microsoft, Amazon and Netflix. These posted mixed returns for the quarter, with just three outperforming the S&P 500 Index.
Amazon, Facebook and Google are under antitrust regulatory scrutiny. Facebook and Google have come under pressure over privacy and data security concerns, and Netflix faces increased competition.
Even so, the market capitalization of these FANGMAN shares ended the quarter at US$8.16 trillion, 17% of total US stock market to March 31. 12-month returns remained strong, with all but two outperforming the S&P 500 Index for the period.
Gender spotlight on the biggest tech stocks
There is 157 unique top 10 of the GLEF group. Of these, 87 belong to the global equity fund segment. Information Technology makes up the largest number of the top 10 holdings with 37, followed by Industrials (27), Consumer Discretionary (26) and Financials (24). (Three of the FANGMANs — Apple, Microsoft, and NVIDIA — are in the GICS information technology sector; Alphabet, Facebook, and Netflix are in communications services; and Amazon is in consumer discretionary.)
All FANGMAN stocks appear in the Q1 top holdings list. Two of the US equity GLEFs, Fidelity Women’s Leadership Fund (Canada) and Impact Shares YWCA Women’s Empowerment ETF, hold six of the seven. Of the global equity funds, all but UBS Global Gender Equality UCITS ETF hold at least one. , six funds holding three. Of the 22 global and North American equity funds, 15 own Microsoft, 10 own Amazon and seven own Netflix. Google is only owned by two GLEFs.
The WIL metrics for the FANGMAN are mixed, with significant discrepancies at the top. None have a female CEO, board chair, or president, behind the S&P 500, where women make up 6% of CEOs. There are three female CFOs and two female COOs in the group. Representation on the board of directors is a positive point. Microsoft and Facebook have the highest female representation on the group’s board, at 45% and 44%, respectively, followed by Amazon’s 40%. Only NVIDIA trails the S&P 500 (28%) and Equileap (25%) averages for women on boards of directors.
But for working women, only Netflix and Amazon are at or above average. All others trail the S&P and Equileap’s average workforce representation of 45% and 37%, respectively. Both Amazon and Microsoft are behind the Equileap dataset in executive-level leadership by 17%.
Among FANGMAN companies, women are underrepresented in the workforce and in the top positions, but they do average or above on corporate boards.
In other gender measures, four of the seven FANGMANs either ended or never used forced arbitration to deal with sexual harassment claims, according to the Force the problem database, a joint project between Adasina Capital, Tara Health and others. The policy has been criticized for allowing employers to cover up allegations of misconduct.
Four of the seven are included in The latest from Arjuna Capital Scorecard on transparency of gender and racial pay gaps, where Facebook, Google, Microsoft, and Amazon all got C grades. Additionally, only Facebook, Google, and Microsoft are signatories to the United Nations Women’s Empowerment Principles. None of the FANGMANs landed in Equileap’s list of the Top 100 Corporate Gender Equality Leaders of 2020.
The GLEF group has 34 major non-FANGMAN information technology holdings. Overall, these companies’ WIL metrics outperformed the FANGMAN, suggesting that GLEF’s investment criteria result in a higher WIL than is rewarded by the market. There are three female CEOs, or 9%, which puts major non-FANGMAN information technology holdings above the 6% CEO in the S&P 500 and well above 0% in the FANGMAN. In addition to a president and a president, there are eight female CFOs. Most notably, female representation on the board of this non-FANGMAN group is 74%, well above the S&P 500 and Equileap averages. 32% do not use forced arbitration to resolve sexual harassment disputes.
All of this data again underscores a recurring theme: the pace of progress on gender equity is too slow and there is still a long way to go in the investment landscape before women are equitably represented.
For more analysis from Marypat Smucker, CFA, visit Parallel Finance.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of the CFA Institute or the author’s employer.
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