BMO GAM has launched its Women in Leadership Fund ETF Series (WOMN), focusing on companies with female leadership and diverse boardrooms.
The firm was the first in Canada to launch this initiative two years ago, in mutual fund version, and now wants to be “platform agnostic” by offering investors an actively managed ETF Series version as well.
Laura Tase, Director, BMO Exchange Traded Funds, said the move is in line with the company’s overall philosophy, adding that 36% of BMO’s board members are women, while 40% of its senior leadership roles are held by females.1
The ETF Series uses a rules based approach and applies a number of filters, primarily a gender diversity screen which includes only companies that have a female CEO and/or 25% of the board members are women. Additional diversification screens allow the ETF to include up to 20 stocks in each of the 11 GIC sectors. They are market-cap weighted and have a maximum weight of 5% per stock.
Tase said there is a growing body of research that has proven that diversity is conducive to better returns and believes this fund capitalizes on this evidence.
She said: “There’s been a lot of research done on this subject and most of the findings show a correlation between diversity and performance. 2
“We found that diverse leadership enhances shareholder return. Also, companies that embrace gender diversity in their leadership teams show a 36.4% higher return on equity and a 12.8% higher price-to-book value when compared to companies that have less gender diversity.3
“Various studies have linked gender and cultural diversity to greater employee productivity, commitment and satisfaction, as well as a stronger focus on responding to customer needs. Research has found that the tipping point is 25% as the minimum amount to effect change in the boardroom and that’s why we chose that number for boardroom representation.”
Tase said BMO is exploring actively managed ETF strategies as long as they can stay true to the values of the ETF: good liquidity, the right amount of transparency and the right pricing She added that combining active and passive allows investors to keep fees low while still getting the benefits of active management in areas that are harder to manage like global fixed income.
BMO is proud of its award recognition for its focus on diversity and initiatives for women customers and employees. Bloomberg has recognized it as one of the top-ranked financial institutions for gender equality, while last year it received a Catalyst award for its work to accelerate diversity and inclusion in the workplace and commitment to gender equality. In 2017, BMO was also recognized by the United Nations’ Global Compact Canada Network with a gender equality award.
BMO Women in Leadership ETF seeks to address the social challenge of under representation of women in senior leadership, by directly investing in companies that support women in leadership roles, and bringing more awareness to the issue.
The real impact will be the shift of assets away from companies that do not support the advancement of women and lack a gender diverse leadership team to companies that have shown this commitment.
1 Source BMO Global Asset Management as of May 31st , 2018.
2 Credit Suisse, The CS Gender 3000: Women in Senior Management. September 2014
3 MSCI, Women on Boards: Global Trends in Gender Diversity on Corporate Boards, November 2015
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