Invest in Women-Led Companies With These 3 ETFs
Investing or supporting women-led ventures isn’t merely a trend but a wise financial move, too. In fact, experts at Forbes believe the next Steve Jobs will be a woman since this lesser acclaimed part of our population can lead inclusive teams toward problem resolution through leveraging tech.
More importantly, investing in women-led companies means your money is in safe hands since women often have to make it work using the leanest resources because that’s what they have experienced.
For instance, a PitchBook Data Inc. report showed that VCs invest 98% of the capital in men-led ventures. On the contrary, women-led businesses that manage to raise capital have 36 times less money than their men-led counterparts.
Although it might put women entrepreneurs at a disadvantage, it also shows their resilience to stand upright in the competitive market despite the lack of excessive capital.
3 ETFs for Women-Led Companies
Exchange-traded funds are baskets of stocks that can be bought or sold through a single trade on an exchange like you would buy or sell one share of stock. They’re a smart investment option for people who don’t want to increase their risk by investing all their money in one basket.
In addition to making investing easier, ETFs also help spread out risk, which aids in minimizing volatility and maximizing return potential for longer-term investments such as your retirement account.
Since women-led companies seem to be profiting more, it’s wise to invest in relevant women ETFs.
Although there is still an imbalance in gender in business roles worldwide, many advancements toward equality between the genders have been made. Here are some women in ETFs if you want to benefit from the higher financial benefits of investing in women-run businesses.
1. SPDR SSGA Gender Diversity Index
The ETF tracks the SSGA Gender Diversity Index to provide exposure to companies in the U.S. with vast gender diversity in senior leadership positions. The companies included in this index must show positive progress toward gender diversity over time.
With 165 stocks, the ETF has a $202.6 million asset base.
2. Barclays Women in Leadership ETN
The fund is designed to include companies with women CEOs, female representation on boards and senior management.
It offers exposure to companies adhering to one of the two criteria: having 25% or more females on the board of directors or having a female CEO. The ETN trades in 200 shares and has a $4 million asset base.
3. Women Who Lead
Women Who Lead ETF is an index of companies with female executives and directors.
The unique feature of the Women Who Lead ETF is that it only invests in companies with at least one woman director or executive. With a 17.72% year to the date change, the fund’s performance has been excellent.
The fund is set up to cater to investors who want exposure to female leadership but don’t have the time to find individual companies that qualify themselves.
Good To Know
ETFs are a considerably better investment category since they are cost-effective, allow you to diversify your portfolio, and access hard-to-own assets. Nowadays, online investing software makes investments in ETFs a breeze. Consider checking out some of these ETFs for women-led companies.
Are Women-Led Companies More Profitable?
Owing to the disproportionality in funding, some investors might believe male-led companies to be more lucrative. However, this is far from true since the lack of investment is because of biases in the investment landscape rather than women’s ability to lead.
For instance, a 2018 study found a significant gender gap in startup funding.
The study highlighted that women are asked questions about “prevention” while men are questioned on “promotions” and achievements in the interviews. The bias has a measurable influence on the funding.
Women-Led Companies Have Performed Better
Meanwhile, the truth is that women-led companies outperform male-led ventures. A Boston Consulting Group study of 350 companies showed that for every $1 of investment capital raised, women-run companies make 78 cents in revenue while male-run companies only make 31 cents.
Likewise, First Round Capital data showed that women-led companies they funded performed 63% better in revenue generation compared to the male-run companies.
Additionally, an Ewing Marion Kauffman Foundation study showed women-led businesses to generate 35% higher ROI than male-led companies.
Why Women-Led Companies Outperform
One of the reasons female entrepreneurs do better than their male counterparts may be that women can be less motivated by money.
An Illuminate Ventures research showed that there are different motivations among men and women for starting companies. The research found 15% of the males were motivated by financial gains compared to merely 2% of the women entrepreneurs.
As an investor, putting your money in a profit-driven venture is risky, considering such entrepreneurs are less likely to make decisions for the long-term financial interests of the business.
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- Forbes. 2019. "10 Stats That Build The Case For Investing In Women-Led Startups."
- Boston Consulting Group. "Why Women-Owned Startups Are a Better Bet"
- Illuminate. "Kauffman Fellows Report."
- Wall Street Journal. "SPDR SSGA Gender Diversity Index ETF SHE (US: NYSE Arca)."
- Stash. "Buy Shares of Women Who Lead ETF (SHE)."