Do corporations that have women on their boards of directors perform well because of the presence of women or because that presence suggests a broader approach to the way they do business? The evidence is inconclusive, but Pax World Mutual Funds wants to give its investors an opportunity to own those companies.
The Pax World Women’s Equity Fund is a sustainable investment fund that considers environmental, social and governmental (ESG) factors, but also puts a special emphasis on gender. Specifically it looks for companies that promote women through “gender empowerment” by placing them on their boards, in senior management positions and through other policies.
“This is one of the tools that management has in terms of generating best return for shareholders,” says Sujatha Avutu, the fund’s portfolio manager. “Having women at the table provides a different perspective and opens a different form of discussion and therefore they arrive at better solutions.”
A study by the research firm Catalyst in 2007 of gender diversity and corporate performance in more than 500 companies with women board directors, found that companies with more women on their boards outperformed those with fewer women in return on equity, return on sales and return on invested capital.
Whether the better numbers were a result of having more women or if the presence of those women suggests an effective business approach that extends to other areas of management is unclear. Other firms have created mutual funds that focus on a specific management practice. The Parnassus Workplace Fund, for example, invests in companies that are included on the annual Fortune magazine’s 100 Best Companies to Work For list. Parnassus believes firms that create good workplaces are also progressive in other areas such as marketing and finance.
Julie Gorte, senior vice president for sustainable investing at Pax World, said the company has reviewed numerous academic studies performed since 2000 on the impact of gender empowerment on financial performance. Not all of the studies were in accord. But many that did find a positive correlation attributed it to a variety of factors.
“The (studies) that speculate on why say things such as women will bring additional perspective to the table and they’re less likely to be part of the group think of the old boy network,” says Gorte. “There is also some academic evidence that women are more likely than men, not significantly, to act in a way that is considered ethical or at least in government compliance in business situations. So they may be more likely to ask penetrating questions of management and less likely to be passive of management.”
Socially responsible investors who make gender empowerment a priority may see this fund as an opportunity to own shares in companies they support. But as an investment, results for the Women’s Equity Fund have been mixed. The fund was up 17.02 percent for the second quarter ending June 30, placing it in the 34 percentile of Morningstar large cap growth funds, meaning that it was nearly in the top third of those funds. For the 12 months ending June 30, the fund was down 27.99 percent, placing it in the 58th percentile and for a three-year period it was down 7.87, putting it in the 65th percentile.
Avutu, the fund manager, says that she selects stocks for the fund by first looking at themes, such as the need for fresh water in the global economy. When she’s found companies that fit in that theme, she researches their financial performance and the stock valuation. The companies that stand out are then sent to a team that conducts social research and gender analysis. The gender evaluation includes a company’s record of promoting women to top positions, how well they are compensated, career training programs in place and the number of women on the firm’s board. If a company does not have at least one woman among its directors it falls off the list.
The fund’s top holdings include Microsoft; ConocoPhillips, the giant energy concern; and the global investment firm Blackrock Inc. Avutu says Blackrock, for example, includes women on its board and in senior management. The company also has family friendly work-life programs and does not have a history of gender-related lawsuits in its past.
The fund has about $30 million in assets under management, down from a peak of $42 million in May of 2008.