According to a New Cambridge Associates Report, Investing in the Unique Capabilities and Perspectives of Women Can Help Investors Not Only Address Social Challenges but Also Find New Opportunities for Strong Financial Returns
Press Release – BOSTON, Sept. 27, 2018 (GLOBE NEWSWIRE) — Gender lens investing – investment strategies designed to make a positive impact in the lives of women and girls, while also meeting necessary return and risk objectives – may provide a unique road toward higher financial returns and greater social impact, according to a new report by investment firm Cambridge Associates.
“Research has shown time and again that diversity of thought and perspective leads to better investment returns, better business strategies and stronger organizations as a whole,” says Deborah Christie, Managing Director at Cambridge Associates and a coauthor of Gender Lens Investing: Impact Opportunities Through Gender Equity.
“That’s why an institutional investor who looks at strategies through a ‘gender lens’ may see excellent opportunities they may have otherwise missed – opportunities to both make an impact that aligns with their mission and to benefit from investment diversification.”
The report points out how much room there is for a gender lens approach to grow. For instance, as of 2017, only 16% of board seats and 4.4% of CEO roles across Russell 3000 companies were held by women – even though by 2020 women are projected to control $72 trillion of wealth, or 32% of global wealth.
The report cites a variety of third-party studies that advance the gender lens argument…
- Sales growth, earnings per share growth and return on assets were all higher in companies where women comprised 50% or more of leadership positions.
- Start-ups founded by women generated 10% more revenue than male-founded counterparts.
- The performance of venture capital firms improves as the ratio of investment in women-led businesses increases, despite these businesses receiving less funding.
- Female investors are less likely to churn portfolios, which helps net returns, whereas male investors trade 45% more than women, which lowers net returns.
- The overall intelligence of a team or company increases when women are included, due to more perspectives and fewer blind spots.
- According to an analysis of 37 female hedge fund managers, female-led hedge funds outperform a general sample of hedge funds over a ten-year period.
Although gender lens investing strategies are not as numerous as other impact strategies, the lists are growing. According to the report, Cambridge Associates monitors about 30 strategies in the public markets that are considered gender lens investments (with $1 billion in aggregated assets). And Project Sage, a research initiative of the Wharton Social Impact Initiative follows 58 private investment strategies with a gender lens focus (at a total of $1.3 billion aggregated assets).
So how can institutional investors enact a gender lens approach? The report says it’s helpful to think about gender lens initiatives in three categories:
- Increasing access to capital for women. This can mean investing in female entrepreneurs and female fund managers or educating women about finance to help them grow assets. It can also mean empowering women through microfinance and small business lending.
- Creating workplace equity for women. This can take the form of investing in companies with gender equity policies – like wage equity and paid family leave – and those that have a certain number of women in senior management positions.
- Supporting products and services that benefit women and girls. This approach means investing in companies focused on improving health and education for women and girls, investing in female-oriented products or investing in products that mitigate societal problems that primarily affect women.
In terms of specific potential strategies, one gender lens strategy might, hypothetically, involve providing private equity capital to female entrepreneurs in Silicon Valley and another may entail investing with a company or investment manager that makes loans to women in rural communities in emerging markets to help them start small-scale businesses. In another gender lens approach, institutions might deliberately seek to have investment strategies and funds managed by women alongside their traditional investment portfolio. One more example could be a venture capital fund that funds products designed to improve the lives of girls.
Adds Christie, “Most importantly, as gender lens investing expands, it will ultimately promote a culture that extends beyond just counting women in the workplace toward one that views investing in women as a societal norm.”
About Cambridge Associates
Cambridge Associates is a leading global investment firm. We aim to help endowments & foundations, pension plans, and private clients implement and manage custom investment portfolios that generate outperformance so they can maximize their impact on the world. Working alongside its early clients, among them leading university endowments, the firm pioneered the strategy of high-equity orientation and broad diversification, which since the 1980s has been a primary driver of performance for institutional investors. Cambridge Associates delivers a range of services, including outsourced CIO, non-discretionary portfolio management, and investment consulting.
Cambridge Associates maintains offices in Boston; Arlington, VA; Beijing; Dallas; London; Menlo Park, CA; New York; San Francisco; Singapore; Sydney; and Toronto. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. For more information, please visit www.cambridgeassociates.com.
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