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Is a super fund that only invests in boards with women good for your investment?

By Helen Baker · March 15 2020
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Earn

Is a super fund that only invests in boards with women good for your investment?

By Helen Baker
March 15 2020
Reading:
egg
egg
board room

Is a super fund that only invests in boards with women good for your investment?

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By Helen Baker · March 15 2020
Reading:
egg
egg
board room

Funds are starting to take a stand against the gender imbalance in the corporate world. Last year, State Street announced it would only be supporting companies that commit to gender diversity. The index fund manages $US2.9 trillion in assets and invests across the ASX.

The ASX 200 Senior Executive Census 2019 showed a decrease in women in executive leadership teams from 23 in 2018 to 17 in 2019. The census also showed 114 companies in the ASX 200 had no women in executive leadership line roles.

Gender diversity is important. When it announced the strategy, State Street said diversity reduced groupthink and cronyism and increased innovation. Companies needed to be nimbler, and their strategy needed to be innovative. A lack of diversity is a business risk.

There is definitely a place for the type of strategy that State Street is taking. A diversified portfolio could support this stance while maintaining financial security.

When investing in any fund, whether they take a stand on gender issues or not, there are a few key considerations.

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1. Diversification

My philosophy is to have hundreds, if not thousands, of different investments. Little bits, and big bits, diversified across industries and investment types ranging from super, global companies, property, fixed interest accounts and bonds. You can have a diverse portfolio and still choose to be out of certain industries that don’t suit your beliefs. For example, I know people that refuse to invest in pharmaceuticals for ethical reasons. And if you can’t find places to invest that fit your ethics, take a capitalist approach. Invest in whatever works economically, then give to charities that support social change you’re interested in.

2. Quality of investments

Higher returns don’t necessarily mean a better investment. The return may be a few per cent less, but what other benefits it will bring to your portfolio? It’s not always wise to go for maximum profits when it could blow up because the investment is riskier or less ethical.

3. Who is making decisions?

Research who is on the board and making the decisions at the fund. Look at their track record. What checks and balances exist in the company, or fund, to prevent people from making rash decisions? Also look at the depth in the team. If it’s small and someone gets sick, is there enough depth to cover for that person? I know of a firm where one person got sick and the strain it caused resulted in bad returns for that year. You want a fund that can weather storms.

4. Aim for long-term security

Be wary of funds that try to time the market. This is when investors base decisions on guesses about what is going up or down. It is a short-term, high-risk strategy. Always be aiming for stability.

If more funds followed State Street’s example, there’d be a lot of pressure for companies to make changes. Clearing a corporate path for women will require flexibility. Having children can pose a real limitation. Not only because of the time off but also the increased domestic demands. Improving the gender balance requires practical solutions to this issue beyond investor pressure.

There will always be those who want to argue — “but are these women the right people for the job?” In my experience, there are ample capable women in finance and business. The systemic and cultural minimisation of our worth is the barrier. This type of thinking is sneaky. It can even exist in our own internalised misogyny. Seeing more women succeed in corporate leadership will inspire others. It will also force men to rethink their (conscious or unconscious) assumptions about what women are capable of.

Helen Baker is a licensed Australian financial adviser and author.

Note: This is general advice only and you should seek advice specific to your circumstances.

Is a super fund that only invests in boards with women good for your investment?
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