The Hypatia Women CEO ETF (WCEO) is significantly outperforming the S&P 500 this year, gaining nearly 20% compared to the index’s less than 13%. The ETF exclusively invests in companies led by female chief executives, including notable leaders like Lisa Su of Advanced Micro Devices and Jane Fraser of Citigroup. This performance highlights a growing trend of strong returns from women-led businesses in a diversifying market.
In a significant market trend, companies steered by women are demonstrating remarkable performance, with the Hypatia Women CEO ETF (WCEO) reaching an all-time high of $40.14 on Thursday. This specialized ETF, launched in January 2023, focuses exclusively on companies led by female chief executives. Year-to-date, WCEO has surged by nearly 20%, significantly outpacing the S&P 500's return of less than 13%.
Patricia Lizarraga, managing partner of Hypatia Capital and founder of the ETF, noted, "This year, as this diversification away from the Mag Seven happens, we're doing extremely well." This performance comes as the market broadens beyond the dominance of a few mega-cap tech companies, which have historically been led by men.
The largest holding in the WCEO is Advanced Micro Devices, led by CEO Lisa Su. The chip giant has seen its market value soar to $786 billion, with its stock price more than doubling this year, up 129%. Lizarraga highlighted, "There's been this incredible performance of the hyperscalers for the last few years. But our proof is in diversification. The truth of the matter is, there are no women hyperscalers."
The ETF's stringent criteria require holdings to have a market capitalization of at least $500 million. Notably, WCEO has outperformed its benchmark, the S&P SmallCap 600, since its inception, even before accounting for fees. Hypatia Capital positions itself as the sole entity globally that continuously tracks the performance of women in CEO roles, ensuring a comprehensive inclusion of both high and low performers.
Beyond stock performance, women CEOs are proving their mettle in leadership. An analysis by Hypatia revealed that when a woman takes the helm of a company that experienced stock declines in the preceding year, they successfully turn around the business in two out of three instances. Lizarraga attributes this to the increased rigor required for women to reach such positions: "All things being equal, women CEOs will outperform because it's harder for them to get there."
Illustrative examples include Citigroup CEO Jane Fraser, the first woman to lead a major Wall Street bank. Since taking over in 2021, Fraser has revitalized the bank by streamlining its global operations and divesting unprofitable units. Citigroup's stock has nearly doubled from $69.54 in March 2020 to $137.64 by Wednesday. Fraser's leadership was recognized with a top spot on Fortune's "Most Powerful Women" list, and she described herself to Financial News as "damn tough."
Similarly, General Motors CEO Mary Barra orchestrated a significant turnaround for the automaker. Since becoming CEO in January 2014, Barra has transformed GM into a more focused and profitable enterprise. The company's stock has climbed 126% to $89.16 from $39.38 on the day she assumed leadership.
Despite these successes, women lead only 11% of Fortune 500 companies. The Hypatia ETF, though still modest in size, has grown from $1 million in assets at its launch. Its equal-weighting strategy removes company-size bias, and sector weights are matched to its benchmark to eliminate industry bias, thereby isolating the "female factor." This means sectors with fewer women-led companies receive larger stock weightings, and vice versa for sectors like health care where women are more represented. The fund also rebalances monthly to ensure all companies remain women-run, adding new women-led companies and removing those where leadership has changed.
Lizarraga expresses hope that WCEO will also drive more women into C-suite positions. "As more board members understand that women deliver more performance with less risk, there will be more women on short lists. There will be more women that are chosen to the CEO spot," she stated. The ETF's growth is crucial for this objective, with distribution being its primary challenge, as it's not universally available across all brokerages. Lizarraga believes that increasing the ETF's size is key to reaching the vast network of public company board directors.
