How and Why You Should Invest in Women - The Hopman Group
 

How and Why You Should Invest in Women

How and Why You Should Invest in Women

It’s March, which is Women’s History Month! Let us take a little time to see how far the fairer sex has come and where they are going in the world of finance. Although, currently, only 6% of Fortune 500 companies have female CEOs, that’s a trend that could see an upward turn if investors start paying attention to the statistics regarding women in the business world.

Why Should You Invest in Women?

With lots of research to back it up, the trend is clear: When women are found in corporate leadership roles, profitability is increased. Over the past eight years, an analysis of almost 11,000 companies has shown that those with women as CEO or chairman have performed better than those run by their male counterparts. Companies with women at the head had an annualized return of 25% during those eight years, while returns of the market as a whole was only 11%, leading one to believe a company run by a woman is more than twice as profitable. Financial services companies have been noting this and investing more in these female-led companies, expecting better stock performance and higher return on equity.

Why are they performing better? It could be because women appear to be heading companies that are less volatile. Less risk means more consistency and so over a period of time, profitability will almost always show an upward trend. It could also be the way the analysts are looking at the data—expecting less from a company run by a woman and therefore more easily impressed with less. But the most likely answer is that women tend to just be better managers. The proof is in the pudding, and in this case, the data just speaks for itself.

Another study done by the Peterson Institute in 2016, involving 21,000 companies worldwide, showed an average net profitability of 6% more when female represented at least 30% of the executive leadership, including the board, as opposed to companies with no female representation. Women make a difference.

Where to Invest in Women

As women climb higher toward the glass ceiling, there is still a lot of work to do. Studies still confirm that a woman on average is still paid only about 80¢ to the dollar for what a man makes, but with more women showing profitability in leadership roles, people will be taking notice. Expect the gap to lessen as more investors show their support.

If you’re interested in investing in women, we can help. Our Women in Leadership portfolio includes some of the companies mentioned here, or we can help you find other options that fit your exact needs.