Fashion and WardrobeAfter a Buyout, Fund Shops for More Women Power
After weathering a rough first quarter in the stock market the fund manager of the Women"s Equity Fund is still bullish on investing in companies that prize gender equity. One of her favorite companies, Bright Horizons, has just been snapped up.
Sujatha Avutu sounds like pretty much any fund manager when she describes her team"s stock-picking philosophy.
"We look for companies that are financially strong, well run, operating in industries with favorable underlying economics and capable of generating above-average cash returns to its shareholders," she says.
But listen to why she picked one company in particular--Bright Horizons, a Boston-based provider of employer-sponsored child care--and the distinctive profile of the Women"s Equity Fund becomes more apparent.
"The company has a diversity council responsible for recruiting and retaining women employees," Avutu says. There are other pluses: child care discounts, flexible work schedules, backup child care, a nondiscrimination policy that includes sexual orientation, and health and insurance benefits to domestic partners of gay and lesbian employees.
The universe of socially responsible mutual funds--large investors who try to use their clout to encourage companies to be good citizens--totals 129 funds with assets of about $50 billion.
Unique Focus on WomenAmong them the Women"s Equity Fund, with $34 million total net assets, founded in 1993, remains unique.
For more information:Pax World Mutual Funds
http://www.paxworld.com
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Some Holdings
*Microsoft, high-technology
*Nokia, high-technology
*T. Rowe Price, financial services
*Procter and Gamble, consumer goods
*Costco, retailer
*Nordstrom, retailer
*Bright Horizons, employer-sponsored program provider
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Plenty of other funds have added gender-equity criteria to company report cards that also grade companies on factors such as their toll on the environment and safety standards inside their factories.
But the Women"s Equity Fund remains the only fund to judge a company"s social responsibility solely on its gender practices.
Despite a broad market downturn, this "pure play" in gender-driven investment has been holding up along with the other socially responsible funds.
For the year that ended Dec. 31, 2007, for instance, the Women"s Equity Fund had total returns of over 10 percent. That"s almost twice as good as the 5.1 percent for the Russell 3000 Index. (The fund measures itself against the Russell 3000 because the Russell index tracks the performance of 3,000 companies that are both large and small, with the same composition as the companies in the Women"s Equity Fund.)
Outperformed the MarketDuring the first quarter of 2008 the fund also weathered an overall decline in the market better than most. It posted an 8.95 percent drop while the Standard and Poor"s 500--a broader market measure--was down 9.45 percent and the Russell 3000 lost 9.52 percent.
In October of last year, Catalyst, the New York corporate research group, studied 520 major companies and found that on average companies with the highest percentage of women on their boards of directors outperformed those with the least by 53 percent.
David Kathman, a mutual fund analyst with Morningstar, doubts a connection between boards" gender diversity and financial performance. "Not because I don"t think gender diversity is important," he says. "If someone found a correlation, I would suspect it of being an accident of the specific companies studied and would want to know what kind of controls were used."
Avutu takes the discussion of the Catalyst finding in a slightly different direction.
"The way I look at it," she says, "all companies have a task or goal at hand to outperform their competitors, and at their disposal they have different tools to accomplish that goal. Companies that choose to use all relevant tools that are available to them--including the intellectual capital and perspectives of women and make intelligent and profitable decisions for the company at all levels of the organization--are simply better companies."
Favored Pick Sold
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Company Shopping List
*promotes women to top executive positions, compensates accordingly
*plenty of women on boards of directors and in senior management
*career development and training programs for female employees
*programs to address women"s health and safety
*programs to help with child care and elder care responsibilities
*use of female-owned companies as vendors and service providers
*close monitoring of hiring and promotions
*positive images of women in the company"s advertising, promotion and marketing
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At the moment, Avutu is saying goodbye to Bright Horizons, one of her favorite holdings.
That"s because in February Bain Capital Partners, a Boston-based private investment firm, offered to buy Bright Horizons for $1.3 billion.
Bain Capital plans to take the company private--or off the stock market--and therefore out of Avutu"s reach.
Avutu, who also manages the Pax World Value Fund, says Bain"s buyout price represented a hefty 47 percent premium to its closing price the day before the company made the offer.
That was good news for shareholders like her fund.
Now she says she will "recycle" the capital from the sale and search for the next woman-friendly company.
Avutu"s employer is Pax World, a socially responsible mutual fund whose eight funds--including the Women"s Equity Fund--have assets of $2.5 billion.
Pax World purchased the Women"s Equity Fund last October from FEMMX Financial Company, which was based in San Francisco.
Marc J. Lane, principal of Marc J. Lane Investment Management in Chicago, says "Linda Pei, WEF"s founder, was terminally ill and had no practical choice but to relinquish control."
Sheryl Nance-Nash is a freelance writer in Long Beach, N.Y. She specializes in personal finance, small business and general business.
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