Jack Bowers, a leading specialist on the Fidelity family of funds, maintains several portfolios, inc...
Fidelity Empowers Portfolios with Woman's Leadership Fund
09/30/2019 5:00 am EST
In many respects, the philosophy to "do well by doing good" sits at the epicenter of what many call socially conscious investing, explains John Bonnanzio, editor of Fidelity Monitor & Insight.
The three pillars of “ESG” investing are environmental, social and ethical governance. The last two — social and ethical — are the cornerstones of Fidelity’s recently introduced Fidelity Woman’s Leadership (FWOMX) stock fund.
Launched in May, Woman's Leadership arrives on the heels of three new Sustainability index funds, bringing Fidelity’s ESG offerings to five.
While it’s easy to dismiss ESG funds as politically correct investing, it does make good business sense: ESG funds attracted $8.4 billion in assets during the first half of the year, versus $5.4 billion in all of 2018. Besides, Fidelity contends that they have the data to prove that investors can do well by also doing good.
As with other funds, fundamental and quantitative stock analysis drive this fund’s investment process. Plus there’s the ESG overlay. Notably, its manager, Nicole Connolly, heads Fidelity’s ESG research team.
While its investible universe encompasses 3,000 U.S. stocks, its charter (to invest “primarily in companies that prioritize and advance women’s leadership and gender diversity” goals) pares that to 700, though it currently holds just 106. So here’s the question: Is the fund’s social screen more likely to add or detract from its returns?
While back-testing has limitations, during the 10-year period Fidelity studied (ending June 2018), the kinds of stocks that Woman’s Leadership might have held is said to have outperformed its Russell 3000 benchmark by 0.99% annually.
As for the fund’s gender diversity mandate, women had to account for at least a third of a company’s board and/or it had to have workplace policies that attract and retain female employees.
A similar study of 1,875 companies by Morgan Stanley also found share-price outperformance in line with Fidelity’s findings. That was the case for U.S. and Canadian firms, as well as for gender-diverse companies throughout Asia and Europe, too.
While some might look to Woman’s Leadership fund as a nod to political correctness, a former fund manager named Abigail Johnson likely supports its mission. After all, she is Fidelity’s “chairman.” With Fidelity capping this largecap blend fund’s expenses at 1.0%, we rate it "OK to Buy".
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