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Women-focused exchange-traded funds (ETFs) have had a challenging history in Canada, but some providers are betting investors can be lured back as women increasingly earn and manage more wealth.
Canada’s first gender-diversity ETF closed in early 2020, less than three years after it launched, due to a lack of investor interest. A slowdown in sustainable investing and the recent market downturn have affected the performance of many gender-diversity-focused ETFs still on the market.
Despite this challenging backdrop, Emerge Canada Inc. recently launched a set of active sustainable ETFs with a different take – they’re all run by women. Each of the five new ETFs, which invest in companies through an environmental, social and governance (ESG) lens, is listed on both the NEO Exchange in Canada and the CBOE BZX Exchange Inc. in the U.S.
Lisa Langley, chief executive officer of Emerge Canada in Toronto, says the firm chose to launch the funds on both exchanges to drive home the message about the value women bring to the investment sector.
“This is about making money for clients,” Ms. Langley says, as well as highlighting “the tremendous imbalance” in the ratio of women money managers compared to men.
The five funds include Emerge EMPWR Sustainable Dividend Equity ETF EPCA-NE, Emerge EMPWR Sustainable Select Growth Equity ETF EPGC-NE, Emerge EMPWR Sustainable Global Core Equity ETF EPZA-NE, Emerge EMPWR Sustainable Emerging Markets Equity ETF EPCH-NE and Emerge EMPWR Unified Sustainable Equity ETF EPWR-NE.
Ms. Langley says the women hired to oversee the Emerge funds have strong, long-term track records, which should inspire not only investors but also other women looking to manage client money.
“We’re trying to say that women portfolio managers are deserving of a place at the table alongside men. This isn’t charity, I’m not asking for people to invest in them because they happen to be women,” she says.
“I’m asking for people to base it on the merits of what they’ve done in the past and what they bring to the table.”
We also want the industry to begin to offer these solutions to their clientele, which includes a growing number of women who are controlling the country’s wealth, she adds.
Ms. Langley points to a 2019 CIBC Capital Markets report showing that 41 per cent of women (single, divorced, widows, and women responsible for investment decisions) control about $2.2-trillion of financial assets. The report states that the number is expected to rise to $3.8-trillion by 2028, or more than one-third of total financial assets, not including real estate.
“I don’t know why it’s taking so long for financial organizations, and asset management firms, in particular, to look at this and say, ‘What are we offering these women?’” Ms. Langley says.
“It’s important for advisors to begin to offer this type of diversity to their clients. We need advisors to realize that it’s time to start talking about this to their clients because more and more women are controlling family wealth.”
Apart from the new Emerge funds, other women-focused ETFs on the market in Canada today include RBC Vision Women’s Leadership MSCI Canada Index ETF RLDR-NE, Mackenzie Global Women’s Leadership ETF MWMN-NE and BMO Women in Leadership Fund ETF WOMN-T.
Women ETFs face competition from other social movements
Tiffany Zhang, ETF analyst with National Bank Financial Inc. in Toronto, says inflows for women-focused ETFs have been relatively flat this year, not including seed capital for the new Emerge funds, due in part to competition from other sustainability investments on the market.
“There are a lot of broad ESG ETFs that may have stolen the thunder a bit from women-focused ETFs,” she says.
She points to Wealthsimple Inc.’s ESG ETFs as an example, which are attracting “pretty good inflows” this year from do-it-yourself investors. These include ETFs that exclude companies with low gender diversity on their boards as part of their sustainability offering.
“I think maybe a lot of investors are using these broader ESG ETFs to express their interests,” she says. “There are also other social movements, like Black Lives Matter and the net-zero transition that are taking center stage as well.”
Ms. Zhang says Emerge’s decision to launch women-only fund managers is unique in North America, but it’s too soon to tell if the ETFs will be successful compared to their sustainability peers.
Charlie Spiring, founder and chairman of Wellington-Altus Financial Inc. in Winnipeg, owned the now-closed Evolve North American Gender Diversity Index ETF after it first launched, and recently bought four of the new Emerge funds for his clients.
Mr. Spiring says he was impressed by the past performance of the women running the new funds.
“I want to invest in great managers,” he says. “We did some due diligence, and every one of them was just remarkable in their own way. … I think the industry still has some biases toward giving women a chance. I want to do the opposite.”
And while launching new ETFs in a volatile market may have been a risky move for Emerge, Mr. Spiring says it could be a good long-term bet.
“We’re at one of the low parts of the cycle,” he says. “In two or three years, I think we’re going to look [back] at this as a wonderful buying opportunity – and that we happened to tie our wagon to some sharp women.”
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