Sallie Krawcheck and Pax World Offer Women’s Global Equality Fund

By Beth Senko

Women’s financial clout is growing and Sallie Krawcheck and Pax World are partnering to invest in the trend by investing in the very companies that are paving the way for women’s success.

In June, Pax World Management LLC and Ellevate Asset Management LLC announced that they have entered into a partnership agreement to manage and distribute the first and only mutual fund in the United States that focuses on investing in companies that are global leaders in advancing women. The fund, Pax Ellevate Global Women’s Index Fund, is a successor fund to the Pax World Global Women’s Equality Fund.

Krawcheck formed Ellevate Asset Management LLC (formerly 85 Broads) with impact investing and asset management executive Allyson McDonald. Ellevate Asset has an ownership investment in the new effort (Pax Ellevate Management LLC) and Krawcheck will sit on the board of trustees of the Fund.

Pax World President and CEO Joe Keefe gave The Glass Hammer additional insight into the new fund, its strategy, and the opportunity for investors.

The Glass Hammer: The Pax World Women’s Global Equality Fund was re-launched in 2010 with some changes. Is this an evolutionary step, or is this a new direction?

Joe Keefe: The shareholders of the Pax World Global Women’s Equality Fund approved a merger into the Pax Ellevate Global Women’s Index Fund, which was formally launched on June 4. The major difference between the predecessor fund and the new fund is that the prior fund was actively managed (that is, a portfolio manager actively bought and sold stocks) whereas the re-launched fund follows an index-based strategy (that is, the fund buys and holds a fixed basket of stocks). We had long felt that an index-based strategy might be the best way to measure the contributions and capture the investment returns associated with gender diversity in business, but no such index existed. So, we built one. The Pax Global Women’s Leadership Index – a customized index calculated by MSCI – is comprised of the most highly-rated companies in the world in advancing women’s leadership on boards and in executive management, as rated by Pax World Gender Analytics. The Pax Ellevate Global Women’s Index Fund invests in the 400 plus companies comprising that index. So, in one sense this is an evolution and in another it’s a new departure. Certainly, we have built the first and only index comprised of, and launched the first and only mutual fund investing in, the most highly-rated companies in the world in advancing women’s leadership.

TGH: The Pax Ellevate fund uses the term index, but is it seeking to perform relative to the index or actually replicate the index?

JK: The fund actually follows what some call an enhanced index or smart beta strategy. The index is a market capitalization-weighted index. The fund invests in all 406 companies in the index but gives added weight to companies with higher gender diversity scores, so the company weightings in the fund are different than the weightings in the index. Research suggests that where women are better represented on boards and in executive management, companies often display stronger long-term financial performance. The Pax Ellevate Global Women’s Index Fund is premised on that research. Now, you will be able to make an apples-to-apples comparison between the market as a whole, on the one hand, and the best companies for advancing women, on the other. Now, if you agree that women should be better represented in corporate leadership, you have an opportunity to invest in those companies where they are indeed better represented. We hope, over time, to be able to demonstrate that these companies with greater gender diversity in leadership are actually better long-term investments.

TGH: Standards for gender-positive practices vary by country and industry. Is the goal to pick only the best companies worldwide, or will the investments be examined relative to local/industry standards?

JK: We do make some adjustments based on local/regional standards, although, with respect to industry and sector, we let the chips fall where they may and make no effort to remain industry- or sector-neutral vs. MSCI World or other global indices. Some regional or country differences are accounted for in the way we score for gender diversity. For example, women hold very few board seats in Japan but we wanted some Japanese representation in the fund, so the thresholds used for Japanese companies are somewhat different from, say, the threshold used for most European companies.

TGH: Will there be a place in the fund to recognize companies that may not be best-in-class but are moving in that direction?

JK: This fund is more about best practices than best intentions. Companies have to demonstrate a commitment to advancing women as evidenced by a number of criteria, including, most importantly, gender diversity on their board and in executive management. In some of our other funds at Pax World, although of which incorporate environmental, social, and governance (ESG) criteria into portfolio construction, we may give some weight to improving performance or aspirational factors. In the Pax Ellevate Global Women’s Index Fund, however, you have to be a leader to qualify for inclusion in the index and in the fund.

TGH: Is this fund aimed primarily at individuals or do you see an institutional market for this product as well?

JK: We think the fund should be attractive to both individual and institutional investors. Moreover, we don’t view this fund as simply a thematic fund or a niche product. This is a broadly diversified, global index-based strategy and we believe the fund can be considered as a core holding in many investor portfolios.
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The rise of the female investor is a theme that has been in the news for a number of years. A study by Russell Investments notes that women control 51% of the private wealth in the U.S., or $8 trillion. That figure is expected to grow women’s wealth at $8 trillion, a number that is forecasted to grow to $22 trillion by 2020. More importantly, women are more likely to invest in companies that do well by doing good. U.S. Trust’s Women and Wealth series found that “65% of women think it is important to consider the positive or negative social, political, and/or environmental impact of the companies they invest in.” And for women, the study indicates that investing for women is not all about the money; “Women feel so strongly about the social impact of their investments, that two-thirds (56%), compared to 44% of men, would be willing to accept a lower return from investments in companies that have a greater positive social impact.” While a number of investment managers are capitalizing on untapped potential for women investors, creating a product designed to fit how women invest in Pax Ellevate is likely to set itself apart from the crowd.