Research Affiliates has created a new fundamental investment strategy based on an index that takes companies’ gender diversity into account.
Announcing the launch of its RAFI Diversity & Governance strategy, the California-based investment management firm – a pioneer in smart beta investing – said the product combined gender diversity data with governance and financial discipline metrics “to seek positive investment outcomes”.
Katy Sherrerd, CEO of Research Affiliates, said: “Research shows that diverse teams who embrace collective intelligence make better decisions and are more innovative. Validating this finding in investment returns is handicapped by the lack of data.
“For RAFI Diversity & Governance, we combine diversity with other measures, particularly financial discipline, to create a better proxy for sound management practices, robust corporate governance, and a healthy company culture.”
She added that cognitive diversity “has long been a driving force behind our research agenda and management practices”.
“We believe this focus creates an environment that promotes collective intelligence and ultimately strengthens the foundation of our firm,” the CEO said.
The new indices use a gender leadership diversity methodology developed by LeaderXXchange, an organisation promoting diversity and sustainability at companies.
This methodology in turn uses publicly available data from companies as well as data from ESG information firm Vigeo Eiris.
Sophie L’Helias, president of LeaderXXchange, said studies showed that companies with greater percentages of women in leadership had the potential to improve financial performance.
“When women are underrepresented in leadership, the company can be less equipped to handle business challenges, understand customer needs, and approach problems from a different perspective,” she said.
Research Affiliates has signed an exclusive distribution deal with BNP Paribas to market structured products linked to the new indices.