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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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Introducing the Women in Leadership theme basket
Peter Garnry
Chief Investment Strategist
Summary: ESG is high on the agenda among companies and investors. Often the focus is only on the E as the environment is a key concern for policy markers due to climate change, but our new equity theme basket is focusing instead on the S (social) through women leadership. We have created a basket consisting of 30 companies with high percentage of women in their leadership team representing $1.1trn in market value. Recent research suggests that companies with a higher degree of gender equality in their leadership team perform better both on fundamentals and in the equity market..
Why women leadership?
Today we are launching our next equity theme basket focusing on women leadership. Why would do we need a women leadership basket? We are currently running an investor theme focus on ESG and the percentage of woman in companies’ executive team is part of the social aspect of companies. Recent research (here and here) also shows that there are mostly positive impact on company performance from having a more gender diversified executive team. This research from S&P Global also show that publicly listed companies with more women in the leadership team performs better.
The histogram below shows the distribution of women in percent of leadership teams among 2,600 companies with a market value above $5bn across North America, Europe, and Asia. The median percentage of women executives is as low as 14.3% with very few companies having gender equality. This figure is arguably very low and shows the big change that will undoubtedly unfold over the coming decades. However, in the meantime there are several companies that already have gender equality in their leadership team and these form the basis of our women leadership basket.
Women leadership basket
The basket consists of 30 companies with 10 companies each from North America, Europe, and Asia Pacific (developed countries). Companies with a market value below $5bn have been excluded from the list. The average percentage of women in executive leadership across the three geographical areas is 63.2% (North America), 52.9% (Europe), and 59.7% (Asia Pacific).
The 30 companies represent $1.1trn in market value with JPMorgan Chase being the largest company in the basket. There are few surprising names on the list such as the mining giant BHP Group and oil & gas exploration company Woodside Petroleum. The median revenue growth across these 30 companies is 12.8% which is above the market average and the median ROIC/ROE is 13.6% which is slightly above the global average. So overall, good quality basket. Sell-side analysts have on average a price target that is 20% above the current price and the median 5-year total return has been 138% which is better than the MSCI World Index.
| Name | Mkt Cap (USD mn.) | Sales growth (%) | ROIC (%) | Diff to PT (%) | 5yr return |
| JPMorgan Chase & Co | 429,430 | -2.0 | 18.3 | 19.2 | 91.6 |
| BHP Group PLC | 165,024 | 41.7 | 33.7 | -4.9 | 141.7 |
| Investor AB | 65,187 | 201.3 | 39.9 | 10.8 | 151.5 |
| Block Inc | 48,729 | 118.8 | 4.2 | 128.2 | 627.0 |
| Lululemon Athletica Inc | 39,631 | 43.9 | 36.5 | 42.4 | 358.7 |
| Hang Seng Bank Ltd | 38,244 | -15.0 | 9.7 | 11.5 | 20.3 |
| DNB Bank ASA | 35,632 | -17.0 | 10.2 | 3.8 | 87.4 |
| Koninklijke DSM NV | 31,736 | 13.8 | 7.0 | 20.2 | 199.4 |
| Wolters Kluwer NV | 25,797 | -2.4 | 16.7 | 8.3 | 178.6 |
| CDW Corp/DE | 24,665 | 12.1 | 26.7 | 18.6 | 273.4 |
| ViacomCBS Inc | 20,459 | 9.5 | 12.3 | 50.8 | -46.1 |
| Etsy Inc | 17,691 | 61.7 | 20.6 | 74.3 | 979.2 |
| Woodside Petroleum Ltd | 16,862 | -7.1 | 3.5 | 16.1 | 4.3 |
| Next PLC | 13,417 | 21.7 | 27.2 | 15.6 | 133.2 |
| REA Group Ltd | 13,134 | 13.1 | 31.1 | 18.0 | 188.0 |
| Xero Ltd | 11,461 | 19.7 | 1.3 | 27.8 | 499.3 |
| Booz Allen Hamilton Holding Corp | 10,985 | 2.4 | 18.1 | 20.3 | 145.9 |
| FinecoBank Banca Fineco SpA | 9,869 | 6.0 | 20.5 | 19.2 | 189.8 |
| CapitaLand Integrated Commercial Trust | 9,444 | 76.3 | 4.1 | 25.6 | 28.3 |
| Ascendas Real Estate Investment Trust | 8,659 | 12.5 | 4.9 | 22.7 | 51.1 |
| Jazz Pharmaceuticals PLC | 8,301 | 25.6 | 3.6 | 47.1 | 13.0 |
| Tenet Healthcare Corp | 7,839 | 11.5 | 16.2 | 26.7 | 300.1 |
| Castellum AB | 7,833 | -0.2 | 3.5 | 18.8 | 114.1 |
| Bright Horizons Family Solutions Inc | 7,144 | 0.7 | 4.9 | 33.9 | 68.3 |
| GDS Holdings Ltd | 6,827 | 37.4 | 1.3 | 115.1 | 361.2 |
| Stockland | 6,535 | -2.0 | 5.3 | 20.2 | 19.6 |
| ASR Nederland NV | 6,425 | 38.6 | 14.8 | 9.0 | 111.0 |
| Orion Oyj | 5,623 | -7.0 | 26.4 | 5.4 | 0.7 |
| Crocs Inc | 5,519 | 72.8 | 62.4 | 121.0 | 1,198.9 |
| Minth Group Ltd | 5,119 | 19.8 | 10.3 | 34.3 | 54.2 |
| Aggregate / median | 1,103,223 | 12.8 | 13.6 | 20.2 | 137.5 |
* ROIC is used for non-financial companies and ROE is used for financial companies
As the performance below shows our Women in Leadership basket has delivered 250% total return compared to 101% for the MSCI World Index since inception in December 2015, but this obviously reflect a combination of surviourship and selection bias as thus historical performance is not an indicator of future performance.
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