SHE Stoops To Conquer
The proliferation of Exchange Traded Funds reached ludicrous proportions a while ago. As we saw with the boom in Mutual Funds as the 1980s came to a close, it's now a race to assemble a collection of the same stocks into as many bizarre combinations as fast as the marketing department can. Along the way, a great many have closed. The investment categories were so obscure and so narrow, they couldn't attract an audience, and were left to linger as untraded ghosts on the exchanges. The investment categories themselves were often good for head shaking bemusement. Who THINKS of these things?
One of them came my way in my timeline called the "SPDR® SSGA Gender Diversity ETF."
It comes with a brilliant ticker symbol: "SHE."
Now, a fund has to be benchmarked against an index. So State Street Global Advisors (SSGA) simply created their own:
"The SSGA Gender Diversity Index is designed to measure the performance of U.S. large capitalization companies that are "gender diverse," which are defined as companies that exhibit gender diversity in their senior leadership positions."
Then they created their own fund to benchmark against the index they created. So by this standard, it can't lose. To be qualified to be included in the index, a large cap firm has to have a proper ratio of women on its board of directors and executive bench. So they have a proprietary index, and a proprietary ETF to go along with it.
And wouldn't you know it? To what should be no one's surprise, the performance keeps up with the index almost dollar for dollar. I may have to try this myself!
From the press release:
“SHE seeks to help address gender inequality in corporate America by offering investors an opportunity to create change with capital and seek a return on gender diversity,” said Kristi Mitchem, executive vice president and head of the Americas Institutional Client Group for SSGA. “This fund empowers investors to encourage more gender diverse leadership and support better long-term social and economic outcomes in support of gender diversity.”
“SHE is designed to offer investors an opportunity to access the potential benefits of gender diverse leadership and seek to drive meaningful social change while maintaining core US large cap exposure,” said James Ross, executive vice president and global head of SPDR Exchange Traded Funds at SSGA. “As the first SPDR ETF to use a proprietary SSGA Index, SHE highlights a path for future innovative products that improve access to unique solutions for investors.”
Which are noble goals. Pity the fund won't do anything to achieve them. Looking at the ETF's largest holdings, 25% of them are in fairly ordinary firms: Pfizer, Coca-Cola, Pepsi, MasterCard, IBM, CVS, Starbucks, etc. Somehow, I don't think the investments this ETF makes will do much to drive social change and foster equality. To season things, and juice up it's "mission," State Street will donate some of the revenues to charities that advance education for women.
However, there is a problem with this "mission centric" (sic) form of investing. To me, an investor or advisor has one goal, and that is to enrich and protect the investor. Your first duty is to yourself and/or the people you serve. And you do that by performance, not cheap displays of moral posturing, or "slacktivism." Not only is this a far fetched marketing gimmick designed to appeal to emotions, it will do nothing to foster the goals it says it will. The entire premise of the fund is preposterous.
Moreover, this isn't exactly a "pure play" when it comes to advancing the interests of equality. There are a quite a few companies in their portfolio in fields like health care and defense that may pose a bit of a moral quandary for the investors this ETF is trying to attract. It assumes people are one dimensional in their beliefs, and that is an insult to the investor to begin with.
So, how did SHE do?
SHE lagged the S&P 500, a more telling benchmark to use, by a considerable margin. An investment like this helps no one but the marketing team. And it's certainly of no benefit to women who might invest in it: wealth enhancement is a great tool of women's empowerment, and they're cheating themselves out of it by putting their money here.
Oh, and the firm that manages this fund? It recently paid out $5 million to reimburse over 300 women to settle a Department Of Labor audit for underpaying them.
The firm's response?
“We are taking into account how the organization is holistically approaching diversity based on a number of factors that go well beyond just gender or pay,” said Rakhi Kumar, head of asset stewardship, in an emailed statement. “There are a number of different mechanisms we use to affect change as a long-term index investor, with the most essential being the ongoing dialogue we have with companies on issues, like diversity, we feel are important.”