Fund managers can outperform the MSCI AC World index while investing in companies that have a positive impact on society and promote gender diversity, according to AXA Investment Managers’ Anne Tolmunen.
Tolmunen is the manager of the $18.7m AXA World Funds Framlington Women Empowerment fund, a fund she has overseen since June 2017.
Although the strategy has a short track record, the offshore fund has indeed outperformed the index since Tolmunen joined the fund alongside co-manager Amanda O’Toole.
Since Tolmunen took over, the fund has delivered a 10.81 per cent total return compared with an 8.21 per cent gain for the MSCI AC World benchmark.
Performance of fund vs sector & benchmark under Tolmunen
Source: FE Analytics
According to Tolmunen, while environmental, social & governance (ESG) awareness is growing among investors – with many looking to incorporate it into their investment process alongside traditional financial analysis – strategies that focus on the gender diversity aren’t that popular.
However, given the real link between increased female representation in a company and its financial performance, she said the need to focus on gender diversity is key for both female and male investors no matter their risk appetite or age.
She said there is an increasing need for strategies that reward those businesses who actively work towards tackling gender inequality.
This, according to the manager, can be a way to say to those companies “We are only going to allocate capital to your company if you have the right behaviours”, since investing in growth companies with an inclusive and diverse culture will not only be reflected in strong returns, it will also feed back into society and into investors’ lives.
But finding growth companies with attractive valuations and strong fundamentals that also promote gender equality and have a positive impact on society is not easy, and there is no business that ticks all the boxes.
However, there are also some companies that are leading the way while helping investors achieve returns, the manager said.
The American online social media and social networking service company Facebook is the second largest holding in the AXA World Funds Framlington Women Empowerment fund at 3.45 per cent of the portfolio.
Although the company has come under fire for some sexist practices – such as allowing the targeting of jobs by gender or banning most photos of female nipples – Tolmunen said its COO and CEO are good examples of gender equality promotion.
“I know Facebook is quite controversial at the moment. One of the reasons why I like this company is because the number two is a woman,” she said. “Sheryl Sandberg is a very visible influential woman, she has written a book encouraging women everywhere to take a sit at the table and take ownership of their career.”
Performance of stock since IPO
Source: Google Finance
“Equally, Mark Zuckerberg has had his second children and has taken two months paternity leave, which is unheard of in the US as even women don’t get too much time leave.
“If you look at CEOs in the US, there has been a culture of ‘who spends the longest hours in the office’. Have you ever heard of Jeff Bezos or Bill Gates going on paternity leave to take care of their children? I haven’t,” said Tolmunen.
According to the AXA manager, Zuckerberg leads by example by taking two weeks of paternity leave as she believes this is a way of telling their employees: “It’s okay to take paternity leave, I am going to do it”.
She added: “Let’s be clear: including more women and giving more roles to women means there is going to be a shift so there is still going to be the same need to take care of children and households.
“If women are to have a bigger role in the company, then men need to have a bigger role in the house and in childcare, et cetera. Otherwise it’s not going to work. That’s why I just don’t focus on maternity leave but parental leave.
“This is a good opportunity for men – who wish so – to take parental leave, because there are many men who don’t dare. It’s about cultural shift and allowing a better balance between work and home, men and women.”
Diageo
Another company on the manager’s radar is London-listed, multinational alcoholic drinks company Diageo. According to the AXA fund manager, as an alcoholic drinks company it can be harder to attract women.
However, she said the ratio of female managers to men across the organisation compared to female employees more broadly is close to 1:1, a sign that Diageo have done a good job at promoting their female workforce.
“What you see Diageo does is very rare because, in most companies, you will find that you will have a certain proportion of men and women,” she explained. “But, actually, the women at the senior level are slowly disappearing and [other women are] not getting promoted [to replace them]. But Diageo is setting an example.”
Bright Horizons
US-based childcare provider Bright Horizons Family Solutions is another company the manager said adds value to the portfolio while leading the way in gender diversity.
Performance of stock since IPO
Source: Google Finance
The AXA manager said the company is not only doing well but is also growing in the US and expanding in the UK.
“What is interesting about this company is that they have good gender diversity practices internally and also more broadly,” said Tolmunen.
“What I like about them is that they are also a childcare company, so it is double impact: you allocate capital to a firm that has the right values promoting equality but through their business are also helping women keep their foot on the ladder when they have children.
“It’s not just children but also ageing parents because usually women not only take care of their children but of their ageing parents.”
She noted the importance for funds to invest in this type of companies to allow women to support businesses like Bright Horizons by allocating capital to them.
“Women tend to have career breaks, because women tend to be underpaid and not get promoted,” Tolmunen concluded.