During the last few years there’s been a spate of empirical research showing that companies with more diverse leadership teams outperform their less diverse peers.1 We’re not surprised, as we actually have even better evidence to support that conclusion — the performance results of our own Pax Ellevate Global Women’s Leadership Fund (PXWIX).
We built an index — the Impax Global Women’s Leadership Index — by rating2 the approximately 1,600 companies in the MSCI World Index (the World Index) based on the degree of gender diversity in their senior leadership, identifying the leaders (the top 25 percent of 400 companies), and then investing in those companies through our Pax Ellevate Global Women’s Leadership Fund. It has been a winning strategy: Since June 2014, the Fund3 has outperformed the World Index, its broad market benchmark.
But that’s not all: During the same period, the companies in the Pax Ellevate Global Women’s Leadership Fund have not only outperformed the World Index as a whole, but have significantly outperformed the bottom 75 percent of companies in the World Index — that is, those not included in our Fund. Over the last 57 months, the Fund’s relative outperformance can be attributed to owning those 400 companies in the World Index rated highest by the Impax Gender Analytics team, i.e., the gender leaders, while not owning those companies in the bottom three-quarters of the World Index — the gender laggards.
What does this tell us? It’s smart to invest in companies that have more gender diverse leadership teams. What else does it tell us? Limiting exposure to companies that lag behind their peers on gender diversity also makes sense. In other words, where we don’t invest matters as much as where we do.
The status of women in an organization tends to have a positive correlation to its performance in the marketplace, and in the marketplace there are gender laggards and gender leaders. We invest in the leaders, and that explains the outperformance of the Pax Ellevate Global Women’s Leadership Fund.
2 The Impax Gender Analytics team measures companies on gender diversity and leadership by examining these five factors: 1. Representation of women on boards of directors 2. Representation of women in executive management 3. Presence of women CEOs 4. Presence of women CFOs 5. Signatory to the Women’s Empowerment Principles, a joint initiative of the UN Global Compact and UN Women (Factors one and two have the heaviest weighting on a company’s rating.) See our index design page for more information.
3 The minimum investment needed for investment in the Pax Ellevate Global Women’s Leadership Fund is $250,000.
The top 10 holdings of the Pax Ellevate Global Women’s Leadership Fund as of 03/31/2019 are as follows: Microsoft Corp. 4.2%; Ulta Beauty, Inc. 2.2%; Intuit, Inc. 2.2%; Estee Lauder Cos, Inc., Class A 2.1%; American Water Works Co., Inc. 2.0%; Principal Financial Group, Inc. 1.9%; Canadian Utilities, Ltd. Class A 1.9%; Viacom, Inc. Class B 1.9%; Johnson & Johnson 1.8%; Cisco Systems, Inc. 1.8%. Holdings are subject to change and are not a recommendation to buy or sell any security.
The annualized returns for the Pax Ellevate Global Women’s Leadership Fund – Institutional class – as of 03/31/2019 were, 1 year: 5.76%, 3 year: 10.69%, 5: year 7.54%, 10 year: 10.99%.
Total annual Pax Ellevate Global Women’s Leadership Fund operating expenses, gross of any fee waivers or reimbursements, for Institutional Class and Investor Class shares are 0.56% and 0.81% respectively as of the 5/1/2019 prospectus. The management fee is a unified fee that includes all of the operating costs and expenses of the Fund (other than taxes, charges of governmental agencies, interest, brokerage commissions incurred in connection with portfolio transactions, distribution and/or service fees payable under a plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 and extraordinary expenses), including accounting expenses, administrator, transfer agent and custodian fees, Fund legal fees and other expenses. (For this purpose, Impax Asset Management LLC does not consider acquired fund fees and expenses to be operating costs and expenses of the Fund.)
Performance data quoted represent past performance, which does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For most recent month-end performance information, visit www.paxworld.com.
RISKS: Equity investments are subject to market fluctuations, the fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. The Fund does not take defensive positions in declining markets. The Fund’s performance would likely be adversely affected by a decline in the Index. Investments in emerging markets and non-U.S. securities are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation, intervention and political developments. There is no guarantee that the objective will be met and diversification does not eliminate risk.
On 6/4/2014, the Pax World Global Women’s Equality Fund merged into the Pax Ellevate Global Women’s Leadership Fund (the Fund), pursuant to an Agreement and Plan of Reorganization dated March 4, 2014 (the “Reorganization”). Because the Fund had no investment operations prior to the closing of the Reorganization, Pax World Global Women’s Equality Fund (the “Predecessor Fund”) is treated as the survivor of the Reorganization for accounting and performance reporting purposes. Accordingly, all performance and other information shown for the Fund for periods prior to 6/4/2014 is that of the Predecessor Fund.
The Impax Global Women’s Leadership Index is a customized market-weighted index consisting of equity securities of issuers organized or operating in countries around the world that demonstrate a commitment to advancing and empowering women through gender diversity on their boards, in management and through other policies and programs, and an understanding of the potential business advantages associated with greater gender diversity, as rated by Impax World Gender Analytics. In addition, the companies comprising the Index meet certain environmental, social and governance (ESG) or sustainability thresholds, as rated by MSCI ESG Research. One cannot invest directly in an index.
The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Performance for the MSCI World Index is shown “net,” which includes dividend reinvestments after deduction of foreign withholding tax. One cannot invest directly in an index.
Copyright© 2019 Impax Asset Management LLC, formerly Pax World Management LLC. All rights reserved. Pax World Funds are distributed by ALPS Distributors, Inc. Member: FINRA. ALPS Distributors is not affiliated with Impax Asset Management LLC.