In the three years or so I have been writing about gender lens investing, I’ve seen an increase in interest in the topic. Far from blank faces at the mention, people are now putting forward their strategies or wanting to talk about the growing area as a whole.
But as with anything new, or newly discovered, it’s hard to get a sense of what’s going on behind the excitement.
Recently, we’ve seen two gender lens funds merge or expand their remit. In February Legal & General Investment Management (LGIM) decided to merge away its Future World Gender in Leadership UK Index Fund into the Legal & General Future World ESG UK Index Fund.
Its assets had dwindled over the previous six months, dropping from around £50m – which it appeared to have under management since launch – to £6m on 31 July 2020, according to FE Analytics, prompting the firm to say the fund had not seen “the level of investor inflows originally expected”.
Then in April, AXA Investment Managers announced it would be broadening the scope of its AXA WF Framlington Women Empowerment Fund to focus on more of the UN Sustainable Development Goals.
It would retain the same manager but become the AXA WF Framlington Social Progress Fund, focusing on affordable housing, essential infrastructure, and financial and digital inclusion; protection through healthcare solutions and safety; and progress through education, entrepreneurship and wellbeing.
“There may be no distribution channel or no appetite, or firms just don’t know how to sell these products,” said Bev Shah, CEO and co-founder of City Hive.
“But what does it say about a firm’s commitments if they have a gender fund one day and not the next? How many other funds limp along?”
Whatever the reason for these expansions, it doesn’t appear to be performance. In fact, in 2020, the AXA fund recorded the highest absolute performance – 18.4% – for the year of the 12 global and 16 regional gender lens equity funds analysed in a recent report, Gender Lens Investing 2021, by Parallelle Finance.
Similarly, the CFA Institute recently noted gender lens equity funds “performed in line with the broader market”.
And while gender lens fund counters may have lost two funds in LGIM and AXA, they’ve also gained three launched in 2020, which include the Desjardins SocieTerra Diversity fund and the Adasina Social Justice All Cap Global ETF. Public gender lens equity funds currently comprise $2.67bn in assets under management, according to the Parallelle Finance study. And in terms of all gender lens funds, a Wharton Social Impact Initiative and consulting firm Catalyst at Large study identified 138 in 2020, nearly a 59% increase from the previous year. Almost half these funds launched in 2019.
“There is space for these products and for different types of lens investing, the information and the data is out there,” Shah added. “ESG funds were niche once too.”
In fact, they may not have lost AXA at all. It’s interesting to note the names of two of the new funds from last year. Putting aside the marketing exercise that broader social names might just get more attention than gender-specific ones, both focus on diversity and social justice, rather than the narrower ‘women’, much like the new AXA social progress fund, which manager Anne Tolmunen said will still have a “critical focus” on the economic empowerment of women.
Perhaps redefining what constitutes a gender lens fund will keep these all under the same umbrella, much like on the flipside, more ESG funds are considering gender diversity in their investment strategies (it is a Sustainable Development Goal after all). Gender lens funds are incorporating more ESG principles (for example, the CFA Institute notes at least four of the 28 gender lens equity funds, including the two new ones, are fossil-fuel free), and so too are ESG funds incorporating more gender lens principles.
It makes sense that broadening the scope of a strategy gives managers a bigger slice of the pie. And those operating in narrower terms might have a better chance of things too without jostling around in the same space. As Jacolene Otto, head of private equity and real estate at Maitland told me: “With any new area of ESG it’s easy to raise money but the challenge is going to be finding and deploying the capital…because you have a whole load of people competing for the same type of assets.”
Or perhaps the limited abilities of an index fund like LGIM’s just aren’t suited to gender lens investing. In ESG Clarity’s March digital magazine, Marina Leacock, director and portfolio manager of the Lazard Minerva Gender Diversity strategy, said: “Some gender-based strategies only review basic female representation data in senior leadership,” before going on to add: “A differentiated approach combines high-quality research with impactful engagement and ownership. This is one of the reasons why we believe gender-lens investing can only be done well in an active strategy.”
Time will tell what will happen to this type of investing and the products out there, but it’s a growing area of interest and it seems care and attention will be what’s needed to get it right.
