Should I Invest in Pax Ellevate Global Women’s Index Fund

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.

There are two primary reasons why I wouldn’t recommend PXWEX to my clients or purchase it myself: fees and performance.

  1. Fees. In my book, ”Every Woman Should Know Her Options: Invest Your Way To Financial Empowerment,” I compare mutual funds to the guy I used to call when I didn't have a better date. That’s because many of them involve high fees that reduce annual returns. There are lower cost alternatives. According to PXWEX’s prospectus, if an individual invested $10,000 in the fund and it returned five percent annually, at the end of ten years the investor would have paid $1,213 toward expenses of running the fund. Contrast that to the Vanguard Total World Stock Index Fund (VTWSX) which would have resulted in $351 in expenses over the same time period. Other Vanguard funds that invest only in U.S. stocks have even lower expenses.  
  2. Performance. Let’s not forget the primary reason women need to invest their money for growth: so they don't outlive it. Therefore long-term performance really matters. Over three, five and ten-year periods, PXWEX’s predecessor fund underperformed benchmark indexes for funds that invest in both domestic and international equities. 

There is a Better Way to Invest in Companies That Advance Women 
Investors can use the list of holdings in PXWEX as a guide and create their own customized portfolio by selecting several companies that pay high dividends or have excellent long-term growth prospects in their industries. Low-cost ETFs representing various asset classes can be added to the portfolio for diversification. A financial advisor can help create this portfolio, but it is also something that women can learn to do on their own.

The reality, though, is that most women don't have the time or interest to do what I suggest. For the female investor who is just starting out, Ms. Krawcheck’s fund may be just the ticket to build engagement and expose more women to the wealth-building benefits of the stock market. One of the perks she plans to offer members of her Ellevate Network is an opportunity to invest in PXWEX at a lower cost, applying the fee schedule for institutional investors.  

Note: The information contained herein is strictly for educational and illustrative purposes, providing commentary, analysis, opinions, and recommendations and should not be considered investment advice for any specific subscriber or portfolio or an offer to sell or a solicitation to buy any security.

Laurie Itkin is a member of the DailyWorth Connect program. Read more about the program here.

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