Can a compelling argument be made for sacrificing returns in order to support companies that advance women's leadership? We shall soon see with the introduction of the Pax Ellevate Global Women’s Index Fund (PXWEX), launched by Sallie Krawcheck, one of the best known and accomplished women on Wall Street.
PXWEX (a successor of a similar fund that has existed for many years) is made up of global companies that support the advancement of women through gender diversity on their boards of directors and in executive management. Of the approximately 400 companies in the fund, a number of them — such as Yahoo, Xerox, and Avon — are run by female CEOs. Others have female CFOs or one or more women on their boards.
PXWEX is the only mutual fund in the United States that invests in global companies with strong records in advancing women and Ms. Krawcheck has stated that the fund provides investors the opportunity to make a “fair” return while expressing their values. But is “fair” good enough?
As a woman, I admire Ms. Krawcheck and applaud her for highlighting hundreds of companies that are committed to advancing women leaders. Some studies suggest diversity on corporate boards can lead to better stock performance. But after examining the historical performance of the fund that preceded this one and factoring in the annual fee that is deducted from the fund’s returns, I concluded that as a financial advisor I would not recommend PXWEX to my clients, nor would I purchase it for my own portfolio. Here’s why.