Bolstering the power of women in the financial world is a fine idea, but the road paved with that good intention can develop the same bumps and detours any startup business encounters as it seeks solvency.
Linda C.Y. Pei put the Women’s Equity Mutual Fund on the market last Oct. 6. Pei says the fund, based in San Francisco, buys stock only in companies with good records on women’s issues.
Michaela Walsh, of New York, says the managers of the Women’s Equity Mutual Fund “have a good product,” but “so did we.”
Walsh and her associates formed the Women’s Asset Management Fund Ltd. on June 1, 1992, registering it in Bermuda.
Walsh’s fund has a slightly different emphasis than Pei’s. Though the managers of the fund agreed to build what Walsh calls a “socially responsible” portfolio “geared toward a peaceful, sustainable future,” that was not its primary concern, she says. What Walsh hoped would be attractive was the “complementary group of experienced women portfolio managers” she had assembled.
Walsh promotes her fund as the first global investment vehicle run entirely by women. The fund is 20 months old and still struggling.
“The challenge is whether women will invest together,” Walsh says. “Women just aren’t there yet.”
Individual investors are not where the big money is, Walsh says. “When we first started, we thought it would be easy” to persuade institutional investors to support the idea. “What we have learned are the realities: Until you have a track record and a base of individual supporters, institutions have an excuse not to invest.”
But Walsh is not giving up. She says: “I think that it is critical that people see that women can make money, and that they are good at it. That’s what we want to prove.”
Pei says she and two other directors, Thomas E. Vickers and Leslie E. Christian, are funding her project out of their savings. “My husband keeps on saying, `Is this a money pit?’ ” Pei says.
But she says part of these costs are paying dividends in that her extensive travels to talk with women’s groups have kept investor interest high following an initial burst of publicity last fall when the Women’s Equity Mutual Fund was formed.
Pei had called a press conference in New York to announce the fund, but the San Francisco Chronicle ran a story before the official announcement, she says. That “caught us by surprise. We didn’t even have a name in the phone book. That was very embarrassing.”
But it also was lucrative. By the time of the official announcement, Pei says, investors had given the fund $40,000 or $50,000.
When the fund was new, Pei estimated that it needed to draw $10 million its first year to become credible and attractive to institutional investors. She says it is still on track.
She says her fund bought its first stocks Oct. 18, putting just under $100,000 into the stock market. She says the fund’s return in its somewhat shortened first quarter, as of Dec. 31, 1993, was 1.3 percent.
“We’re ahead of the market,” says Vickers, who is in charge of the actual investing.
Both of these funds are based, to some degree, on the same idea. Peter McIntosh, senior vice president of mutual funds operations at Charles Schwab headquarters in San Francisco, says, “If you can tap into a group with something that they really care about, you’ll certainly get their attention.” The question for any special interest fund, he says, is whether “that attention will stay riveted.”
To keep an investor’s attention, you have to produce sufficient return, McIntosh says, and people who care about the rain forest or women’s issues still have “real-world needs-retirement, college.”
People with lofty ideals cannot count on finding very many similar believers irrational enough to “invest for reasons other than economic gains,” he says.
Pei says the response so far has been “very encouraging,” but she doesn’t expect word of mouth and news stories to generate the kind of returns she wants over the long haul.
“We have to do some marketing to move forward because if we don’t make it in terms of size by, what, within a year, October of ’94, we will no longer have the credibility.”
Pei says she and Vickers look for good investments in much the same way as the rest of the financial community, by watching for trends and looking for solid companies that can expect to make money on those trends. When they find such a company, she says, they go to Amy L. Domini, another director of the fund.
“I believe if a company is doing good” and treating its employees and customers fairly, “it will benefit the company,” Pei says. But she knows a lot of people believe there is a cost to socially responsible investment, that you can’t do well while doing good.
“Amy Domini was tired of answering these questions all the time, so she decided to do something about it,” Pei says.
Domini, who is a principal of Kinder, Lydenberg, Domini & Co., in Boston, set up her own stock index, a socially responsible counterpart to the Standard & Poor’s 500.
She picked 400 stocks in May 1990 that met general social criteria, demonstrating a concern for peace, human rights, the environment, economic development and worker issues. Then Domini started tracking their performance.
“Over time,” Pei says, “they have outperformed the S&P.”
When Pei began investigating whether a mutual fund could “narrow its universe” to only companies that treat women well, she asked Domini to sort through her files and determine if that were possible. Pei says the list that sorting produced was extensive: “Our universe has 300 stocks in it, companies that fit right now, and we’re adding more and more every day.
“I really believe,” Pei says, “that if you’re good to your employee, then the employee will be loyal to you, and your customers will find out about you, and they will be loyal to you.”
This, she reasons, will benefit the bottom line, making such companies a good investment. Therefore, people who put money into a company because it treats women well will encourage such behavior and make money. Says Pei, “If I didn’t believe in that, none of this would make sense.”
