{"id":4042,"date":"2014-08-30T06:48:16","date_gmt":"2014-08-30T10:48:16","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=4042"},"modified":"2014-08-30T06:49:46","modified_gmt":"2014-08-30T10:49:46","slug":"is-it-smart-to-invest-in-the-new-womens-fund","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=4042","title":{"rendered":"Is it Smart to Invest in the New “Women’s” Fund?"},"content":{"rendered":"

\"next-ave\"<\/a>I\u2019m always looking for the best ways to invest my retirement savings, especially if there are new ideas worth considering. So the recent announcement of the<\/span>Pax Ellevate Global Women’s Index Fund<\/a>, which invests solely in stocks of companies viewed as \u201cadvancing women\u2019s leadership,\u201d caught my eye.<\/span>
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The fund holds shares of more than 400 global firms around the world that<\/span>,\u00a0<\/em>according to its<\/span>description<\/a>, \u201cdemonstrate a commitment\u00a0to advancing women through gender diversity on\u00a0their board, in executive\u00a0management and through other policies and programs, as rated by Pax World\u00a0Gender Analytics.\u201d<\/span>
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(<\/span>MORE:<\/strong>\u00a0<\/span>3 Ways to Invest With Your Conscience<\/a>)<\/span>
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Some of the companies \u2014 such as Alcoa, Avon, Est\u00e9e Lauder, General Electric, Microsoft, Pepsico, Procter & Gamble and Yahoo! \u2014 are led by a female CEO or have two or more women on their boards.<\/span><\/p>\n


\u00a0(Click here to read this \u00a0column on PBS Next Avenue<\/a>)<\/span><\/strong><\/p>\n


(The similar-sounding new\u00a0<\/span>Barclays Women in Leadership Total Return Index<\/a>\u00a0buys unsubordinated debt \u2014 so it\u2019s a little exotic.)<\/span>
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But is a mutual fund of stocks that are selected\u00a0<\/span>because<\/em>\u00a0of their women-friendly nature a smart way to invest for retirement? I\u2019m not so sure.<\/span>

Sallie Krawchek, the Fund’s Buzzy Creator<\/strong>

The Pax Ellevate fund is getting a lot of buzz because the brains and marketing spark behind it is Wall Street sweetheart and media star Sallie Krawcheck. She\u2019s the former president of global wealth and investment management at Bank of America and ex-CEO of Citigroup\u2019s wealth management business. (Maybe you remember the Fortune cover story on her: \u201c<\/span>Can Sallie Save Citi?<\/a>\u201d)<\/span>
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\u201cI can think of no better way to invest in women than to invest in those companies around the world that have distinguished themselves by both their business performance and their leadership in advancing women,\u201d Krawcheck said in a June press release announcing her plans to join forces with Pax World Management (a socially responsible investment company) to roll out the fund.<\/span>
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(<\/span>MORE<\/strong>:\u00a0<\/span>Women and Money Management: A Sad Story<\/a>)<\/span>
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With assets of $52.6 million, Pax Ellevate Global Women\u2019s Index Fund is pretty tiny by mutual fund standards; Fidelity\u2019s Magellan Fund has $16.1 billion in assets, by comparison. Krawcheck\u2019s fund is the successor to the Pax World Global Women\u2019s Equality Fund, which was actively managed (its captains decided which stocks to buy and sell) and lagged its peers in performance. The new fund runs on autopilot, with a set basket of stocks.<\/span>
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Ellevate Network for Women<\/strong>

Its name change reflects the moniker of Krawcheck\u2019s Ellevate Asset Management and her women\u2019s professional group,\u00a0<\/span>Ellevate Network\u00a0<\/a>(formerly known as 85 Broads; Krawcheck\u00a0<\/span>told PBS NewsHour\u2019s Paul Solman<\/a>\u00a0that Ellevate is a play on the French \u201cshe\u201d). A\u00a0<\/span>membership<\/a>\u00a0in the Ellevate Network starts at $100 a year for women just beginning their careers and goes up to $1,000 a year for female execs.<\/span>
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Investing in women-centric businesses is the latest wrinkle in the increasingly popular idea of<\/span>socially responsible investing<\/a>\u00a0\u2014 putting your money in companies you believe are doing the right thing when it comes to matters such as the environment, health and workplace conditions.<\/span>
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Tradeoffs of Socially Responsible Investing<\/strong>

Generally speaking, socially responsible mutual funds have shown lower returns and somewhat higher fees than funds with similar investment objectives (say, ownership of large company stocks) but without the filter.<\/span>
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The large-growth\u00a0<\/span>Calvert Equity fund<\/a>, for example, one of the biggest and oldest socially responsible funds, gained 15.2 percent annually, on average, over the past three years with annual fees of 1.2 percent. By contrast, large-growth Magellan, gained 18.1 percent annualized over the past three years with annual expenses of .50 percent.<\/span>
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Interestingly, several of my female friends told me they\u2019re okay potentially giving up a little return and paying a little more in fees in exchange for making a financial commitment to the cause of women leadership.<\/span>
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It\u2019s all relative in a world with no guarantees, one of them told me.<\/span>

\u201cIf I make a few hundred dollars less than I might investing elsewhere, that\u2019s cool with me,\u201d she explained. \u201cInvesting in a woman-run business would make me feel good. It\u2019s like I\u2019m doing my part to fight for women\u2019s rights.\u201d<\/span>
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Some financial advisers agree. \u201cI believe in providing investments that help women achieve their life goals and support their values,\u201d Zaneilia Harris, a certified financial planner and president of\u00a0<\/span>Harris and Harris Wealth Management Group<\/a>\u00a0in Upper Marlboro, Md., told me. \u201cThis partnership with Sallie Krawcheck and Pax Investments will allow socially conscious women to invest in causes that align with their values.\u201d<\/span>
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The $1,000 minimum initial investment to get into the Pax Ellevate Global Women\u2019s Index Fund makes the fund pretty affordable, too.<\/span>
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Data Behind Women-Run Firms<\/strong>

Perhaps there\u00a0<\/span>is\u00a0<\/em>an investment argument to be made for buying shares in this kind of fund.<\/span>
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A 2012\u00a0<\/span>Credit Suisse Research Institute report<\/a>\u00a0found that companies with one or more women on their boards performed better on a variety of measures than ones without them. And last month,\u00a0<\/span>Fortune\u00a0<\/a>determined that stocks of the 27 \u201cFortune 1000\u201d companies with female CEOs outperformed the S&P 500 over the course of their leaders\u2019 respective tenures (103.4 percent vs. 69.5 percent). The Fortune numbers are fairly compelling, although though a sample of 27 is pretty small.<\/span>
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(<\/span>MORE<\/strong>:\u00a0<\/span>Women: Are You Prepared for a Money Emergency?<\/a>)<\/span>
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2 Concerns: Fees and Track Record<\/strong>

If you\u2019re intrigued by the idea of buying a fund investing in companies that are pro-female, however, know this: Some experts I interviewed were put off by Pax Ellevate Global Women\u2019s Index Fund\u2019s fees and the fund\u2019s lack of a strong track record.<\/span>
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The fund\u2019s expense ratio of nearly one percent is high for an index fund; the average international index fund has an expense ratio of .47 percent, according to\u00a0<\/span>Charles Schwab<\/a>. (Krawcheck lowers its expense ratio to .74 percent for Ellevate Network members, which is still on the high side.)<\/span>
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\u201cIf you\u2019re investing for philosophical reasons, and it makes you feel good, and you\u2019re willing to pay for that [higher fee] and forego some returns, then that\u2019s okay,\u201d said financial adviser Eileen O’Connor<\/span>,\u00a0<\/strong>co-founder of\u00a0<\/span>Hemington Wealth Management<\/a>\u00a0in Tysons, Va<\/span>.<\/strong>
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Personally, I\u2019m motivated more by getting the biggest bang for my bucks than my gender values. I only buy shares of mutual funds with great prospects and low costs. I look for other ways to support causes I believe in, such as volunteering my time and making charitable donations.<\/span>

Deena Katz, a financial adviser and associate professor of personal financial planning at\u00a0<\/span>Texas Tech University<\/a>, agrees with me.<\/span>
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\u201cWhen clients ask me to invest in socially responsible or exclusively women\u2019s funds, the first thing I say is, \u2018It\u2019s hard to spread ideals on a cracker.\u2019 said Katz. \u201cIf you are prepared to live with lagging the industry, then I say fine. But if you need your portfolio to perform to secure your next-phase goals, then I say, \u2018Let\u2019s rethink how you can support these efforts in a different way.\u2019\u201d<\/span>
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3 Other Ways to Support Female Leaders<\/strong>

If you agree with Katz and me, here are three alternative ways you might consider supporting women business leaders:<\/span>
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1. Cherry pick a few stocks Krawcheck\u2019s fund owns and invest in them directly if you think they seem promising.<\/strong>\u00a0That way, you reap the benefits of holding a few great companies without diluting your portfolio with shares of some dogs. Side note: you might look specifically for stocks in the Pax Ellevate fund that pay dividends, to help you ride out shaky markets.<\/span>
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2. Invest directly in a women-owned business via a microloan.<\/strong>\u00a0<\/span>Plum Alley<\/a>\u00a0for example, is an e-commerce and crowdfunding site that helps women-run businesses raise money. Minimum donation: $5.<\/span>
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If a project reaches its funding goal, Plum Alley keeps 5 percent of the total amount raised. There\u2019s also a separate credit card processing fee of 2.9 percent; if the funding goal is not met, no amount will be charged.<\/span>
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3. Buy the products and services of some of the companies the Pax Ellevate fund invests in.<\/strong>\u00a0Comb through the firms on Krawcheck\u2019s roster (you can find them\u00a0<\/span>here<\/a>), for example, and see which ones appeal to you as a consumer. That kind of buy hits the bottom line straightaway.<\/span>
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As for me, I\u2019m eyeing the $35 Est\u00e9e Lauder \u201cTumultuous Pink\u201d sculpting\u00a0<\/span>lipstick<\/a>.<\/span><\/p>\n

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