Investing Only In Women-Led Companies, This ETF Is Expected To Rise 20% .

Hypatia Women CEO ETF, based on an index that has outperformed its benchmark over the past five years by more than 20 percentage points, invests exclusively in companies that are led by women. The ETF invests only in companies that are led by women.

‍

WCEO, which is a U.S.-listed ETF, began trading on the New York Stock Exchange earlier this year, according to Patricia Lizarraga, managing partner at asset management firm Hypatia Capital, and was set up on the hypothesis that female factors outperform the malefactors.

‍

In her experience, Lizarraga, who has a background in investment banking and private equity, has found that female leaders possess strong business acumen as well as effective leadership skills. Those who succeed in top positions have had to perform at a higher level due to the institutional barriers that prevent female candidates from achieving top positions. This has led to better results in the long run for those who do succeed.

‍

By investing exclusively in companies that are led by women, the WCEO ETF seeks to isolate this "female factor" from the rest of the market.

‍

"We created a system that would, in our opinion, cut down on the presence of the female factor as much as possible," Lizarraga told Trade Algo. “As soon as we had that algorithm, if you like, then we created a backtest of it, going back five years, which gave us an index that we could use."

‍

FT Wilshire US Small Cap Index has outperformed this index in the past five years by over 20 percentage points in comparison with its FT Wilshire US Small Cap Index benchmark.

‍

The ETF, which is named after the prominent Egyptian philosopher and mathematician Hypatia, has risen by 5.63% this year, beating the S&P 500 (up 4.29%) but underperforming its benchmark (which is up 7.5%).

‍

The fund is also expected to see an increase of another 19.7% over the next twelve months, according to the weighted average of analyst price targets of the constituent stocks compiled by FactSet, based on a weighted average of analyst price targets. FactSet data shows that the S&P 500 is expected to rise by 14 percent this year, according to the data.

‍

A total of 125 stocks are currently included in the fund, which replicates the sector and industry allocations in the benchmark fund. The aim of this strategy is to ensure that the ETF does not favor sectors where female CEOs are more likely to be found.

‍

A purist approach is also taken by WCEO when it comes to its investment thesis, according to Lizarraga, which means it actively omits stocks of companies with female leaders where it was not possible to isolate the factor that made women successful.

‍

For example, AssetMark Financial was excluded, since nearly two-thirds of the company is controlled by one shareholder, the investment bank Huatai International, which owns nearly half of the company. In Lizarraga's opinion, such a structure of ownership could lead investors to perceive the board of the company as being nonindependent as a result of this ownership structure.

‍

She added, "We are very fond of that company, but ultimately, all the ownership of that company belongs to its Chinese shareholders.". "The success of this company cannot be attributed to the CEO alone if, in my opinion, the company is controlled by another company to a much greater extent than the CEO.".

‍

Lizarraga hopes that investing in women-led companies will be a profitable investment vehicle that will help investors improve the diversity of their allocations and demonstrate that investing in women-led companies can have significant returns.

‍

“WCEO offers you the opportunity to switch your portfolio from 90% male CEOs to a 50-50 environment, and you don't have to wait 132 years for equality,” Lizarraga said.

‍

Women are CEOs at 41 companies in the S&P 500, which is less than 10% of the benchmark, according to Catalyst, a workplace diversity charity.