RBC launches first gender-diversity ETF that tracks only Canadian companies

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RBC Global Asset Management is joining the roster of firms that now offer gender diversity exchange-traded funds for investors looking to promote women in the workplace.

On Thursday – International Women's Day – the RBC Vision Women's Leadership MSCI Canada Index ETF will begin trading on the Aequitas NEO Exchange Inc. With the ticker RLDR – and management fee of 0.25 per cent – the fund will look to replicate the MSCI Canada IMI Women's Leadership Select Index, which tracks companies based in Canada that have demonstrated commitment to gender diversity as part of their corporate social responsibility (CSR) strategy.

"We were hearing from investors that there was a high demand for a Canadian-focused product; as well from an impact investing perspective, investors are looking at companies who are forcing more change in Canada," says Mark Neill, head of RBC ETFs.

The index aims to include companies that have strong female representation on boards and in executive leadership positions. Company boards must comprise at least 30-per-cent female directors, or have at least three female directors, or two female directors and one woman in a current executive leadership role.

Research conducted by MSCI found that companies in the MSCI World Index with strong female leadership – defined as the presence of three or more women on a board, or as having a higher percentage of female directors than the average in its country – generated a return on equity of 10.1 per cent a year versus 7.4 per cent for those without, as of Sept. 9, 2015.

The launch of gender diversity funds in Canada has accelerated over the past year; and while the RBC product will be the third gender diversity ETF to hit the Canadian market, it is the first fund to focus solely on Canadian companies. Investors who already hold Canadian equity funds may want to pay attention to the fund's top holdings as the index holds a large percentage in financials and energy companies such as the Big Five banks, Enbridge, Canadian National Railway and Suncor Energy.

ETF providers Evolve Funds Group and Mackenzie Investments both launched global diversity ETFs in 2017. With the catchy ticker HERS, the Evolve North American Gender Diversity Index ETF was the first gender diversity ETF to arrive in Canada last fall. It charges a management fee of 0.4 per cent to invest in equity securities of North American companies that have demonstrated commitment to gender diversity as part of their CSR strategy. It tracks the Solactive Equileap North American Gender Equality Index.

Mackenzie followed closely with the introduction of Mackenzie Global Leadership Impact Fund in December. The fund tracks the Pax Global Women's Leadership Index and charges a management fee of 0.6 per cent. Mackenzie also offers the fund in a mutual fund wrapper with a 1.6-per-cent management fee.

Outside the ETF arena, BMO Asset Management was ahead of the curve launching a similar mutual fund in 2016 with the BMO Women in Leadership Fund. With a management fee of 1.4 per cent, the fund looks to invest in North American companies that have a female CEO or a board of directors with at least 25-per-cent female representation. Ninety per cent of the companies listed in the fund are U.S.-based, the rest are Canadian companies.

The BMO fund references one of the first women in leadership indexes launched in the United States – the Barclays Women in Leadership Total Return Index. Investment strategies targeting gender diversity emerged in the United States much earlier than in Canada. One of the first ETFs in the United States was the Barclays Women in Leadership index exchange-traded note (WIL-NYSE) that launched in 2014. Its most recent one-year return was 7.5 per cent.

Exchange-traded funds to consider when looking to support gender diversity in the workplace

• Evolve North American Gender Diversity Index ETF (HERS-TSX), MER 0.4%
• Mackenzie Global Leadership Impact Fund (MWMN-NEO), MER 0.6%
• RBC Vision Women’s Leadership MSCI Canada Index ETF (RLDR-NEO), MER 0.25% *

* begins trading March 8.

Source: The Globe and Mail, Bloomberg

Top 10 holdings in MSCI Canada IMI Women's Leadership Select Index

• Royal Bank of Canada: 8.34%
• Toronto-Dominion Bank: 7.49%
• Enbridge: 6.37%
• Suncor Energy: 6.35%
• Bank of Nova Scotia: 5.32%
• Nutrien: 4.50%
• TransCanada Corp.: 4.24%
• Canadian National Railway: 4.09%
• Bank of Montreal: 3.57%
• Canadian Imperial Bank of Commerce: 2.89%

Source: MSCI