L&G Investment Management has developed a proprietary index that will form the basis of its first gender-oriented fund, the L&G Future World Gender in Leadership (GIRL) UK Index fund.
Helena Morrissey, head of personal investing at the group and chair of the Diversity Project, has worked with the corporate governance team including Sacha Sadan, director of corporate governance, Clare Payn, head of corporate governance, North America, and David Barron head of index equity and smart-beta and manager of the fund, to develop a UK mandate that will allocate more to companies that have achieved higher levels of gender diversity.
At a launch event this morning attended by Investment Week, Morrissey said: "Gender inequality has been a key issue of our time creating despondency, debate, frustration and headlines but we want to do something about it.
"The GIRL fund will invest in the women of our future. It will send a message to companies that if they are investing in the success of women, they are investing in the success of their businesses."
Barron has created an index that will use the top 350 UK listed companies as a starting point and then score and rank companies based on four gender diversity measures:
• Women on the board of directors
• Women executives
• Women in management
• Women in the workforce
They are ranked between -1, the worst companies, and 1, the best, with zero being neutral. See table for the highest-scoring companies that have the highest weightings in the fund currently. Renewables Infrastructure has the "perfect score", said Barron, and as a result their weight doubles within the index.
Companies are expected to reach a minimum of 30% representation of women in these four measures and Sadan emphasised the focus going forward is on those that are improving their diversity measures rather than as they stand now. The index will be re-balanced every six months.
Payne said: "We have written to the lowest-scoring companies to explain to them how the funds work and offer engagement. We want to help them improve their score."
This year, LGIM pledged to vote against the chairs of boards of FTSE 350 companies if they do not have a 25% female representation at board level, as it revealed it voted against 37 board chairs in the UK in 2017 due to the lack of diversity.
LGIM is also considering adding a fifth metric scoring companies based on their gender pay gap, but as this has only just started to be reported, it has not yet been included.
Retail, institutional and intermediary share classes are available today, with charges of 50 basis points.
L&G is seeding the fund with £50m.
Barron said there is no particular target return for the fund but model portfolios for the past five years suggest a return correlated with the FTSE 350 but with lower volatility.
Morrissey added: "Data shows that companies with more diverse senior management perform better and companies that have been robust on this have improved returns. We hope to deliver good returns after fees."
For more on this story, see the Monday 21 May issue of Investment Week magazine.
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