A Gender-Focused Strategy Beat the S&P 500 by 141 Percent

Investing in companies with the most women in board, management and workforce roles more than doubled the benchmark's return over 10 years.

Women occupy only 20 percent of board seats at companies in the S&P 500. Some studies suggest that having more women in leadership roles at corporations can have a positive impact on performance metrics and share price. So can you profit from a strategy that focuses on gender diversity? A simple backtest suggests the answer is a resounding yes.

The strategy is based on screening for the companies that are in the top half of the S&P 500 in terms of women’s representation on their boards, management, and workforce.

To screen for S&P 500 companies with the best gender diversity, run {EQS}.
To screen for S&P 500 companies with the best gender diversity, run {EQS}.

To set up the screen, go to {EQS}. Enter “SPX” in the field and click on the top match. Type “women” in the field and click on the % Women on Board item in the list of matches that appears. Select Percentile, then enter “50” and press GO. Repeat the steps, selecting % Women in Management this time. Finally, repeat again, this time selecting % Women in Workforce. As of early May, those criteria trimmed the list to 20 stocks. Click on Results for a list.

This story appears in the July/August issue of Bloomberg Markets.
This story appears in the July/August issue of Bloomberg Markets.
Cover artwork: Alan Coulson

On the Results page, click on Backtest to see how a strategy of investing in such companies would have performed. Over the past 10 years, an equal-weighted portfolio of such gender-diverse companies, rebalanced quarterly, would have generated a total return of 238 percent, outperforming the S&P 500 by 141 percent.

The portfolio topped the benchmark in 65 percent of the periods under consideration—and the highest outperformance came at the end of the third quarter of 2008, after the collapse of Lehman Brothers.

What’s more, the weighted average return on equity for the portfolio was 15 percent higher than that of the S&P 500 last year. Return on invested capital was 1.3 percent higher than that of the benchmark.
 
R S is an equity market specialist at Bloomberg in Singapore. Cosereanu is a portfolio and risk specialist in London.
 

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