- Companies with higher levels of women in leadership (WIL) have been shown to report superior performance.
- The 29 gender lens equity funds (GLEFs) include both global and regional equity offerings with a total AUM of $3.28 billion.
- Technology stocks experienced a milder quarter, with the S&P 500 Information Technology NTR Index trailing the overall S&P 500 Index.
- The largest technology stocks, known as FANGMAN stocks, have mixed gender diversity metrics, with significant gaps at the top.
- In terms of gender equality, the technology sector ranks the lowest among all sectors.
- In the GLEF group, information technology represents the largest number of top 10 holdings.
- Non-FANGMAN technology companies in the GLEF group tend to have better gender diversity metrics compared to the FANGMAN stocks.
- Overall, progress for gender equity in the investing landscape is slow, and more needs to be done to achieve equitable representation.
Ample research suggests that companies with higher levels of women in leadership (WIL) tend to outperform their peers on various metrics. The availability of 29 gender lens equity funds (GLEFs) that incorporate WIL and other gender equity criteria further supports this notion. These funds, consisting of both global and regional equity offerings, have a total asset under management (AUM) of $3.28 billion as of 31 March 2021.
During the first quarter of 2021, these funds generally delivered single-digit gains, with some achieving double-digit returns. However, their relative performance during this period was mixed. The financials sector, followed by information technology, had the highest allocation within the GLEF group as of 31 March. This trend has persisted for the past two years.
Unfortunately, no sector scores above 50% in achieving gender equality, according to the 2020 “Gender Equality Global Report and Ranking” by Equileap. The technology sector ranks the lowest among all sectors, with a gender score of less than 40%. This persistent gender inequality in technology firms is a well-documented issue.
In terms of stock performance, technology stocks, particularly the FANGMAN stocks (Facebook, Apple, NVIDIA, Google (Alphabet), Microsoft, Amazon, and Netflix), have been driving market returns in recent years. However, their dominance waned during the first quarter of 2021, with the S&P 500 Information Technology NTR Index trailing behind the overall S&P 500 Index. Out of the FANGMAN stocks, only three outperformed the S&P 500 Index during this period.
Regulatory scrutiny and various challenges have impacted the FANGMAN stocks. Amazon, Facebook, and Google are facing antitrust scrutiny, while Facebook and Google have been pressured due to data privacy and security issues. Netflix faces increased competition. Despite these challenges, the combined market capitalization of these stocks stood at $8.16 trillion as of 31 March 2021, representing 17% of the total US stock market.
In terms of gender diversity metrics, the FANGMAN stocks have mixed results. None of them have a female CEO, board chair, or president, which lags behind the S&P 500’s representation of female CEOs. However, the FANGMAN stocks generally have better board representation compared to the S&P 500 average, with Microsoft and Facebook leading with 45% and 44%, respectively. In terms of workforce representation, only Netflix and Amazon meet or exceed the average representation for women in the S&P 500 and Equileap datasets. However, both Amazon and Microsoft lag behind in executive level leadership representation.
Other gender metrics also reveal areas where the FANGMAN stocks can improve. Four out of the seven FANGMAN stocks have either ended or never used forced arbitration to address sexual harassment claims. Only Facebook, Google, and Microsoft are signatories to the UN Women’s Empowerment Principles. Additionally, none of the FANGMAN stocks made it to the 2020 Equileap top 100 list of corporate gender equality leaders.
In the GLEF group, information technology has the largest number of top 10 holdings, followed by industrials, consumer discretionary, and financials. The non-FANGMAN technology companies in the GLEF group generally have better gender diversity metrics compared to the FANGMAN stocks. They have a higher representation of female CEOs, chairs, and board members. Additionally, a significant percentage of these companies do not use forced arbitration to resolve sexual harassment disputes.
Overall, the data emphasizes the slow progress in achieving gender equity across the investment landscape. More needs to be done to ensure women’s equitable representation in leadership positions and the workforce.
For more analysis from Marypat Smucker, CFA, visit Parallelle Finance.
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