Inside the advisory company run by women, for women
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Fulcrum Capital is an investment advisory company led by three women who share the same goals — to deliver investment returns to clients while making a difference in the lives of women and girls.
For the past five years, the Seattle-based adviser has been allocating its clients’ assets using what it calls a “gender lens” investing strategy.
Alongside a good return on investment, the strategy has the following targets: increasing access to capital for female entrepreneurs and businesses that have women in leadership positions, promoting gender equality in the workplace and increasing the number of products and services that benefit women and girls.
“As a society, we should strive for equal opportunity for everybody and build an entire ecosystem that will deliver significant economic dividends, diverse ideas and talents for growth and innovation,” says Fulcrum’s co-founder and chief executive Darcy Johnson.
When selecting stocks and bonds Fulcrum evaluates 13 gender criteria, such as the percentage of women on the board, in executive management and in the workforce; whether the company has a female chief executive and chief financial officer; the benefit of products and services to women and girls; its gender pay gap and equal pay transparency; its flexible work and parental leave options; as well as whether it is a signatory to the UN Women’s Empowerment Principles.
When selecting an external asset manager, Fulcrum checks whether women are represented in the portfolio manager and analyst roles.
A gender-based approach came naturally to Fulcrum because it had been focused on environmental, social and governance investing since the company’s establishment in 2007.
It was encouraged by Ms Johnson’s own involvement, for five years, with InFaith Community Foundation. InFaith is a faith-based US foundation with $430m invested in portfolios with the goal of increasing funds for its charitable causes.
Ms Johnson joined the InFaith board around the time the foundation was creating the WomenInvest InFaith Portfolio — a fund intended to help reduce violence against women.
The $10m portfolio, managed by Veris Wealth Partners, invests in companies that give women access to economic opportunities, education, housing and full participation in business and public decision-making.
In her capacity as a board member, Ms Johnson says she was responsible for putting together InFaith’s first gender lens investing fund — an experience that helped her integrate the investment approach at Fulcrum.
Michelle Mathieu, chief investment officer at Fulcrum, says the company recognised that gender lens investing was an opportunity to make money for clients and make a difference. Combining its gender research and data with its chief executive’s experience and connections, Fulcrum was “ready to just grab that flag and wave it”, she says.
Ms Johnson adds: “We felt like we were uniquely positioned to be able to really push the envelope in gender lens investing because of our experience in ESG, and [the fact that] we are a women-owned and women-managed firm.” The third senior member of its leadership is also a woman, managing director Janet Welcher.
Fulcrum’s roughly $420m in client assets have been screened using the gender lens criteria. About 59 per cent are invested directly in equities and bonds, 33 per cent in exchange traded funds and around 8 per cent in cash or money market instruments.
Fulcrum has launched two fresh initiatives. The first is its Gender Forward fund, an internally managed portfolio of 25 stocks evaluated using a proprietary quantitative and qualitative system. The second is a collaboration with SNW Asset Management, which started managing an in-house fixed income fund for Fulcrum using its gender-based strategy.
Ms Mathieu highlights a 2018 Bank of America Merrill Lynch report, Women: the X-Factor, showing companies with greater diversity tend to have lower share price and earnings per share volatility and a higher return on equity. She also cites a 2015 McKinsey report, which says achieving gender equality in the workplace could boost the world’s annual gross domestic product by $28tn by 2025.
Advisers who do not advocate ESG investing tend to point to the potential for curtailing gains by limiting the permissible pool of investments. But Fulcrum says it is a matter of picking the right assets.
“If you select investments using better characteristics and traits that identify companies that are going to be more sustainable and grow faster, then you’re limiting your selection process to a better part of the investment universe,” Ms Johnson says.