Barclays PLC is capitalizing on investor interest in women in leadership roles with a new product that will follow the performance of major U.S. companies with female CEOs or directors.
Barclays has created an index of 85 companies that either have female CEOs or have at least 25-per-cent female directors on the board, and will issue Barclays Women in Leadership exchange-traded notes to track the index. The notes will begin trading Thursday on the NYSE Arca Exchange (ticker WIL).
The companies in the index include International Business Machines Corp., whose CEO is Ginni Rometty; Yahoo Inc., led by CEO Marissa Mayer; General Electric Co., which has 29-per-cent female directorship; and AT&T Inc., also with 29-per-cent female directorship.
Barclays director Sue Meirs, who is overseeing the new product, said research studies suggest companies with more women in leadership have better financial performance.
"We're not taking a stand on it, but there certainly is research out there suggesting there is a correlation between greater female leadership and better stock price performance," she said in an interview Wednesday.
If the new index had been in existence for the past five years, it would have outperformed the S&P 500 total return by an average of 1.3 per cent annually, Ms. Meirs said.
She said many investors are also looking for ways to invest in companies that "match what they feel is the right thing to do."
"They want to be supporting those companies that have policies they agree with – in this case promoting gender diversity at the leadership level," she said.
Barclays is not one of the companies in the index because it is not U.S.-based – it is headquartered in London – and because it would be a conflict of interest to include it, Ms. Meirs said. She said it also would not qualify under the investing criteria because 21 per cent of its directors are women.
Beyond the inclusion of women criteria, companies in the index must have a market capitalization of at least $250-million (U.S.), and have average daily trading liquidity of at least 25 million shares over the prior three months to ensure they are large and liquid, she said.
Barclays will allow up to 100 companies in the index – a maximum of 10 companies from each of 10 different major industry sectors – but so far has only 85 because some industries don't have enough firms with women in senior roles.
The notes are not traditional exchange-traded funds (ETFs), but are instead exchange-traded notes, or ETNs. ETNs are valued based on the performance of the underlying companies' shares, but Barclays does not actually purchase the shares, so investors have no actual ownership stake in the companies.
Instead, the notes are guaranteed by the bank and simply track the index, which means they are similar in some respects to bonds, requiring an assessment of Barclays's credit risk to support the payments. Canadians can purchase the ETNs on the NYSE Arca Exchange.
Barclays already offers 82 different ETNs in the United States with different investment criteria but identical designs, said Ian Merrill, Barclay's head of ETNs for the Americas. He said they are appealing to some investors in part because there are no costs involved in buying the underlying shares, there is no lag in adjusting holdings, and there are no complex investment products such as swaps needed to manage the investment strategy.
"There are no swap costs and nothing else that would be more typical in an ETF," Mr. Merrill said. "So you're really getting one-to-one exposure to the index. We think that's where the demand is going to be – where people want a true access product to the index."
The new product is the second created in the U.S. to attract investors interested in women in leadership. The Pax Global Women's Leadership Index Fund is managed under a partnership between Pax World Management LLC and Ellevate Asset Management LLC, whose principal is Sallie Krawcheck, a former senior executive at Bank of America.
The Pax fund draws from a global sampling of companies, not just U.S.-based firms, and uses different criteria to choose companies. It is also a mutual fund rather than an ETN.
Ms. Meirs said there is room in the market for two funds appealing to different investors. "We were astonished that there are only two out there," she said.