Ample research demonstrates that companies with higher levels of women in leadership (WIL) report superior performance on a range of metrics. Founded on WIL and other gender equity criteria, the 29 gender lens equity funds (GLEFs) available to individual investors include 13 global equity funds and 16 regional equity offerings. As of 31 March 2021, AUM for the GLEF group is $3.28 billion.
In tandem with global equities, these funds generally turned in single-digit gains for the three-month period ended 31 March 2021, with several funds in the double digits. Twelve-month absolute returns were strongly positive for the global and regional equity segments. Relative performance for both periods was mixed.
Amid the nascent economic recovery, financials is the largest AUM-weighted GICS sector allocation for the group as of 31 March, followed by information technology. These sectors have been trading the top allocation spot for the GLEF group for the past two years.
No sector scored above 50% in achieving equality, according to the 2020 “Gender Equality Global Report and Ranking” by Equileap, which provides gender scores on a global dataset of the 3,700 largest public companies. Sector scores were in a small band of 31% to 39%, with information technology in last place. Persistent gender inequality in technology firms is not a new phenomenon and has been widely documented.
Technology Stocks Turn in a Milder Quarter
For the past two calendar years, the largest technology and tech-related stocks have been driving broad market returns. This trend slowed its course during the first quarter, as the S&P 500 Information Technology NTR Index trailed the S&P 500 Index. Seven of the largest technology providers have become known as the FANGMAN stocks: Facebook, Apple, NVIDIA, Google (Alphabet), Microsoft, Amazon, and Netflix. These posted mixed returns for the quarter, with only three outperforming the S&P 500 Index.
Amazon, Facebook, and Google are facing anti-trust regulatory scrutiny. Facebook and Google have come under pressure for data privacy and security issues, and Netflix faces increased competition.
Even so, the market cap of these FANGMAN stocks ended the quarter at US $8.16 trillion, 17% of the total US stock market as of 31 March. Twelve-month returns remained strong, with all but two outperforming the S&P 500 Index for the period.
Gender Spotlight on the Largest Technology Stocks
There are 157 unique top 10 holdings in the GLEF group. Of these, 87 fall into the global equity funds segment. Information technology represents the largest number of top 10 holdings with 37, followed by industrials (27), consumer discretionary (26), and financials (24). (Three of the FANGMAN — Apple, Microsoft, and NVIDIA — are in the GICS information technology sector; Alphabet, Facebook, and Netflix are in communication services; and Amazon is in consumer discretionary.)
All of the FANGMAN stocks appear in the first-quarter top holdings list. Two of the US equity GLEFs, the Fidelity Women’s Leadership Fund (Canada) and Impact Shares YWCA Women’s Empowerment ETF, hold six of the seven. Among the global equity funds, all except the UBS Global Gender Equality UCITS ETF hold at least one, with six funds holding three of them. Among the 22 global and North American equity funds, 15 hold Microsoft, 10 hold Amazon, and seven hold Netflix. Google is held by only two GLEFs.
WIL metrics for the FANGMAN are mixed, with significant gaps at the top. None have a female CEO, board chair, or president, trailing the S&P 500, where women are 6% of CEOs. There are three female CFOs and two females COOs in the group. Board representation is a bright spot. Microsoft and Facebook have the strongest female board representation in the group, 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.
But for women in the workforce, only Netflix and Amazon are at or above average. All others trail both the S&P and the Equileap average workforce representation of 45% and 37%, respectively. Amazon and Microsoft both lag the Equileap dataset in executive level leadership of 17%.
Among FANGMAN companies, women are underrepresented in the workforce and in the most senior positions, but they fare average or above on boards.
In other gender metrics, four of the seven FANGMAN have ended or never used forced arbitration to address sexual harassment claims, according to the Force the Issue database, a joint project between Adasina Capital, Tara Health, and others. The policy has come under criticism for allowing employers to conceal allegations of misconduct.
Four of the seven are included in Arjuna Capital’s latest Scorecard on gender and racial pay gap transparency, where Facebook, Google, Microsoft, and Amazon all earned C grades. Also, only Facebook, Google, and Microsoft are signatories to the UN Women’s Empowerment Principles. None of the FANGMAN landed in the 2020 Equileap top 100 list of corporate gender equality leaders.
There are 34 non-FANGMAN information technology top holdings in the GLEF group. As a whole, the WIL metrics of these companies outrank the FANGMAN, suggesting that the GLEF investment criteria result in superior WIL than is being rewarded by the market. There are three female CEOs, or 9%, which puts the non-FANGMAN top info tech holdings above the 6% CEOs in the S&P 500 and well above the 0% in the FANGMAN. In addition to one chair and one president, there are eight female CFOs. Most notably, female board representation within 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 reemphasizes a recurring theme: The pace of progress for gender equity is too slow and much more needs to be achieved across the investing landscape before women are equitably represented.
This article first appeared in Enterprising Investor (CFA Institute) on July 7, 2021.