Wall Street veteran Sallie Krawcheck is teaming up with a money manager for an index fund focused on women – a fund that before its re-launch suffered dismal long-term performance.

Krawcheck, a former executive at Bank of America and Citigroup, joined forces with Pax World Management to roll out the Pax Ellevate Global Women’s Index Fund (PXWEX) on June 4.

It’s the latest version of a women-focused active fund that was introduced as a mutual fund, called Women’s Equity Fund, in 1993. It was introduced by Linda Pei, the late president of FEMMX Financial – a women-owned financial advisory firm – who passed away in 2007. Women’s Equity Fund was acquired by Pax World in October 2007 and given the PXWEX ticker symbol.

The new, re-launched fund with the same ticker and Krawcheck’s backing will invest passively in the 406 top-rated companies in the world for advancing women, based on qualities such as the proportion of women on boards and in senior management.

Companies are judged and ranked by the Pax World Gender Analytics team, which consist of five portfolio managers and analysts from Pax World. The team works with MSCI to calculate the market cap-weighted Pax Global Women’s Leadership Index, a group of global companies that have high levels of female directors and managers compared to the broader market. 

'A LITTLE GIMMICKY'

Scott Hanson, a Sacramento, Calif.-based advisor, says he would not use PXWEX with his clients unless they specifically requested it, which he doesn’t envision a large segment of his clients doing. “It’s an interesting concept and a cool way to spotlight women in leadership, but it’s a little gimmicky from an investing standpoint,” he says. Instead, Hanson prefers broad indexes, noting that he does not believe he can achieve superior returns by investing in social sectors.

Other advisors are less tolerant of potentially using PXWEX for clients. “I will not be investing in this fund,” says George Papadopoulos, a Detroit-based fee-only RIA who uses primarily broad-based ETFs and index funds. “If a client comes to me with the mandate of investing in a certain way instead of allowing me to do my job and help them reach their goals, I simply choose not to work with them and refer out to a colleague who will be a better fit.”

ENGAGING WOMEN

Ned Van Riper, a recruiter for independent, wirehouse and bank advisors based in Columbus, Ohio, however, is more positive about the future outlook of PXWEX for financial planners. He says there will be an audience for women-focused index funds as more women lead in business and manage financials on behalf of their household.

PXWEX is on most major advisory platforms, including Schwab, Fidelity, Wells Fargo and UBS, Krawcheck says. “I’ve been having tons of conversations with advisors about how they can better engage women and launching this index just made sense,” she explains.

When asked about the underperfomance of PXWEX’s active predecessor, Krawcheck says: “It’s really not the same fund … it’s completely rejiggered – a quantitatively determined index.” Krawcheck says she has become increasingly interested in values-based investing and how to more fully engage women across all industries, opting for a mutual fund as opposed to a hedge fund or another investment vehicle because of transparency.

Krawcheck, who also recently changed her firm’s name from 85 Broads (a Goldman Sachs reference) to Ellevate (denoting femininity and upward movement) says her partnership with Pax World reflects her efforts to help serve an underserved market – namely women and millennials. She adds that this group is more eager to pursue “impact investing” opportunities. 

FROM ACTIVE TO INDEX

The Pax Ellevate Global Women’s Index Fund will seek investment returns that match or exceed the performance of the Pax Global Women’s Leadership Index, according to a statement by Pax World Management and Ellevate Asset Management, whose principal is Krawcheck. It is the first and only mutual fund in the U.S. dedicated to investing in the top-rated companies in the world for advancing women, according to a website for the fund.

The track record of the roughly $48 million Pax World Global Women’s Equality Fund: underperformance before the re-launch for three-, five- and 10-year time frames compared to the MSCI World benchmark. Over 10 years as of April 30, PXWEX underperformed by 344 basis points, compared to the benchmark. Year to date as of June 3, however, individual class shares were ahead of the MSCI by 54 basis points, and institutional class shares were ahead by 62 basis points.

“We reached the conclusion that companies that advance women are positioned to deliver long-term financial performance, and that’s harder to do with an active strategy,” says Joe Keefe, CEO of Pax World Management, in explaining the re-launch.

Keefe says the defunct active strategy looked at gender leadership along with price earnings, cash flow, regional and sector tracking and other factors to construct a portfolio. With the index, he says, the new fund can methodically focus solely on gender leadership. “It’s the best way to measure contributions women make to the bottom line.”

ADVISOR DISTRIBUTION

He adds that 96% of the fund’s distributors have historically been advisors, and that the new index fund will continue that strategy. The Pax World re-launch and Ellevate partnership reflect the ESG-focused mutual fund provider’s effort to package and sell its products more easily to advisors, which has become increasingly imperative for product distribution, Keefe says.

According to Robert Goldsborough, a fund analyst at Morningstar, the partnership may also reflect an attempt to rebrand itself following underperformance of its active women-focused fund – with an overhaul of its product offering for advisor needs being necessary.

“Having Sallie Krawcheck part of this makes a big difference too, as her presence and vast following can only help give the fund and other Pax World products more visibility and potentially more advisor support,” Goldsborough says.

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