SHE’s No. 2: Gender Diversity Lures Buyers to One of 2016's Top ETF Debutsby
Here’s a different way to diversify your portfolio.
Looking at the 10 biggest exchange-traded fund launches of 2016, nine are focused on “smart beta” strategies that are so in vogue with portfolio managers. But coming in second was a fund of a completely different flavor: State Street Corp.’s SPDR Gender Diversity ETF. Its ticker symbol? SHE.
With $284 million in assets since its February creation, the fund tracks companies with greater levels of gender diversity in senior leadership roles. It’s second only to the Wisdom Dynamic Currency Hedged International Equity Fund, which investors have poured $292 million into since its inception in January.
There’s a catch in the numbers. All but 3 percent of the inflows came from the California State Teachers’ Retirement System, the second-largest pension fund in the U.S. That’s not unheard of in ETF land. Fund providers often line up a large investor to insure a successful launch, especially with off-beat products, said Eric Balchunas, an ETF analyst at Bloomberg Intelligence.
“If you line up an institution beforehand, you get a better chance to be at the top list,” Balchunas said. “This is in-line with institutions being more socially conscious and into things like gender diversity and low-carbon stocks.”
Even so, it’s not easy to reach the fund’s level of assets under management in such a short time. Only one in 20 funds sees that kind of growth, according to Balchunas.
Much like smart-beta and its strategic cousin multi-factor investing, the SHE fund is an attempt by ETF providers to find growth and differentiation in an increasingly competitive and saturated $2.8 trillion market.
For its part, State Street Global Advisors markets the fund as more than just a feel-good product. Gender diversity is an investing factor, according to the firm, which cites a MSCI study showing a 36.4 percent higher return on equity in companies with women at the leadership level.
“This is not just a marketing gimmick,” said David Mazza, head of ETF and mutual fund research at State Street. “We have a history of working with large institutional investors who may be interested, and they continue to use ETFs more and more in their portfolios to get access to certain segments of the market.”
So far, the fund has acted similarly to the S&P 500. Since its launch in February, it has gained 9.5 percent, compared to the gauge’s 11.4 percent. Among it’s top holdings are blue-chip companies Pfizer Inc., PepsiCo Inc. and Amgen Inc.