Toronto-based BMO Investments Inc. is counting on the success of women corporate leaders to provide financial and social returns to clients who invest in its new BMO Women in Leadership Fund.
The mutual fund, which was launched to financial advisors on Thursday along with the new BMO Fossil Fuel Free Fund, is the firm’s first foray into “impact investing.” Specifically, BMO Women in Leadership Fund will invest in North American companies whose CEO is a woman or in which women represent at 25% of the board of directors.
Although the product may be considered a good fit for advisors who are women or advisors whose client base is focused on women, “we want all advisors to have this as an offering within their toolbox,” says Kevin Gopaul, chief investment officer and senior vice president with BMO Global Asset Management.
Impact investing refers to portfolios that are built with the purpose of producing a measurable and beneficial social or environmental impact in addition to a financial return.
The companies that are reflected within the fund will be derived from those included in London, U.K.-based Barclays Bank PLC’s Women in Leadership North American Total Return CAD Index. The stocks must have at least $250 million in market capitalization, with 90% of the portfolio held in U.S-based companies while the remaining 10% will be held in Canadian companies.
However, the reference to an index does not mean it is a purely passively managed fund, says Gopaul, as the firm’s investment managers can choose the weighting of the securities.
The portfolio has proven its financial success, according to Gopaul, who says that it has outperformed the S&P 500 composite index by 22% in back tests that go back to June 2008.
This supports findings from various studies conducted in recent years that have shown companies led by women, or with a heavier representation of women on their boards, are often more financially successful than those with fewer women.
For example, companies with CEOs who are women produced a return on equity (ROE) of 15.2% in 2013 whereas companies with CEOs who are men produced a ROE of 11.9%, according to The CS Gender 3000: Women in senior management report produced by Zurich-based Credit Suisse AG, which analyzed the success of 28,000 managers at more than 3,000 companies.
The Credit Suisse report, which was published in 2014, also includes multiple examples of companies within different sectors in which women representing more than 15% of senior management produce a higher ROE than companies in which women constitute less than 10% of senior positions.
BMO Women in Leadership Fund was developed directly in response to consultations with advisors and investors.
“We find a growing demand and a growing segment of investors want their investments to reflect either their personal principles or they want to have conviction with the money they have to invest,” Gopaul says. “We’re trying to respond with a couple of ideas. It’s all about giving investors choice.”
That choice also now includes BMO Fossil Fuel Free Fund, a responsible investment mutual fund that aims to provide long-term growth of capital by investing in a globally diversified portfolio of equities that excludes companies involved primarily in the development and infrastructure of fossil fuels.
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