A Fund That Focuses on Women
Women's Equity cherishes companies that promote women.
More women have entered the executive suite, but there's still work to do. That's the point behind the Women's Equity fund, which invests in stocks of large companies that its managers think will advance the social and economic status of women.
Now investors so inclined don't have to pay as much to merge their values with their portfolio. Women's Equity (symbol FEMMX) trimmed its expense ratio to 1.34% from 1.48% in October. The fees were cut to make the fund more competitive with other large-company funds, says co-founder Linda Pei. In addition, she says, the fund introduced a share class for institutional investors in response to interest from endowments, foundations and other organizations seeking to support women's issues.
Women's Equity stands out among socially screened stock funds, also known as "socially responsible" funds. It is the only such fund that focuses mainly on women's issues. Values-based funds often lag their benchmarks and other funds that don't exclude stocks from their portfolios based on social reasons. Since 1999, when Bill Apfel and Heidi Soumerai joined Women's Equity as managers, the fund returned an annualized 3%. That gain is paltry, but it beat the return of Standard Poor's 500-stock index by nearly one percentage point per year, on average.
Women's Equity is premised on the idea that companies that treat women well are good investments. Among other screens, the fund filters stocks for the percentage of women in senior management positions and on boards of directors. Screens also favor stocks of companies with diverse workforces and those that support environmental causes. The fund excludes companies that produce tobacco, alcohol, weapons or nuclear energy, all traditional bogeymen of left-slanting funds. The various screens narrow the universe of large-company stocks to about 350, from which the fund managers choose about 70 to fill out the fund.
Managers split duties at the fund. Soumerai primarily handles social research on companies. Once the undesirables have been eliminated from consideration, Apfel, who has been managing money since 1989, picks the stocks, looking for a mix of bargain-priced and fast-growing companies. BP, Bank of America, Microsoft, 3M and Costco are among the fund's ten biggest holdings.
Pei manages the fund's portfolio of small loans to women-owned businesses in developing countries. Micro-lending makes up about 1.6% of the $32 million fund's assets.
Over the past year, shareholders of Women's Equity have been paying for their principles. For the one-year period through October 4, the fund returned 9%, according to Morningstar. That trailed the SP 500 by four percentage points. Despite its large stake in BP, the fund has suffered from a shortage of energy stocks, Apfel says. He expects the fund's performance to pick up as investors shift toward the kinds of large companies with solid earnings and little debt that Women's Equity favors.