Two-Year Attribution for Workplace Equality Index

Wednesday, March 23rd, 2016

It has now been two years since investors have had a way to invest in the Workplace Equality Index®, and we thought it an opportune time to recap how the index has performed over that time period. For the time period of February 24, 2014 to February 29, 2016, the Workplace Equality Index® returned an annualized 4.40%, comparing favorably with the S&P 500® Index annualized return of 4.07% during that same time period. As a reminder, we created the index as a way for investors to get equity market exposure investing solely in companies that are leaders in LGBT workplace equality. We originally created the screening process used in the Workplace Equality Index® for LGBT-focused foundation clients of ours with the intention of satisfying their fiduciary duty for broad equity market exposure, thus the policy of equal weighting the index.

In 2015, the Workplace Equality Index faced significant headwinds as an equal-weight index as stock market returns were very narrow. This caused our index to slightly underperform in 2015, unlike 2014 when it outperformed the S&P 500® Index. To illustrate this, the FANG stocks (Facebook, Amazon, Netflix and Google) contributed approximately 60% of the return to the S&P 500® Index in 2015, with a combined weight of almost 4% in the capitalization-weighted S&P 500® Index. The Workplace Equality Index®, while owning both Facebook and Google, had a combined weight of 0.5% in the FANG stocks last year.

From an attribution perspective, we offer the following thoughts on the performance of the Workplace Equality Index® versus the S&P 500® Index at the sector level.

Consumer Discretionary: We have generally been double the S&P 500® Index weighting in the discretionary sector, with plenty of travel and leisure companies embracing workplace equality. The sector detracted from relative returns as our weighting in companies like Amazon was lower (see discussion on FANG stocks above). Also detracting from relative performance were the hotel and casino stocks such as Hilton, Wynn Resorts, MGM Resorts and Caesars Entertainment.

Consumer Staples: An even weighting didn’t make up for lackluster returns in companies such as Avon Products. The biggest detractor in the staples sector has been the index’s lack of ownership of tobacco stocks as well as underweighting in soft-drink companies.

Energy: Our massive underweighting in energy has been one of the largest contributors to relative performance over the past two years, contributing over 3% to relative performance over the S&P 500® Index. Our ongoing dialogue with energy companies confirms our thesis that “Houston, we have a problem” as LGBT workplace equality is simply not on many of these companies’ respective radar screens.  A shout-out is due to long-time sole energy representative in index, Chevron.

Financials: Overall, the financial sector detracted from returns for the past two years, with much of the negative relative return coming from our foreign bank holdings. Non-S&P 500® Index constituents Deutsche Bank, Credit Suisse, Barclays, HSBC and UBS all posted large double-digit declines during the time period. Not owning Berkshire Hathaway also detracted from relative performance in a larger way than we would have thought. Smaller weightings of large U.S. banks and larger weightings of insurers added to returns as well. Our slight overweighting of the financial sector had a slightly negative impact.

Healthcare: The sector, while underweight the S&P 500® Index, provided a positive boost to returns over the past year. Equality-minded healthcare stocks returned over 20% during the time period compared to the S&P 500® Index healthcare constituents that returned an average of 15%, showing that there is indeed a “Return on Equality™”. While the pharmaceutical and biotech industries are pioneers in workplace equality, many companies in the equipment, hospital and diagnostic industries have yet to fully embrace LGBT equality.

Industrials: Generally even weight in industrials, our constituents in the sector had much better returns than their peers in the S&P 500® Index, returning 3% more than their less equality-minded peers. This is another example of a sector where we see inclusive companies outperforming their less equality-minded peers. The sector added to relative performance over the past two years.

Information Technology: While the Workplace Equality Index® has been just slightly underweight the S&P 500® Index, our equal-weight structure detracted from return in the sector over the past two years as large stocks such as Apple, Microsoft, Google (Alphabet) and Facebook had much larger weightings in the S&P 500® Index over the past two years. The sector is one of the standouts in LGBT workplace equality, and we applaud many of the companies in their stance against state actions that are targeted against the LGBT community.

Materials: Many people are surprised by our equal-weighting in the materials sector – a sector that has been hit hard by falling commodity prices around the world the past two years. This sector was neutral to relative performance the past two years. Most of the holdings in the sector have very small weights in the S&P 500® Index and significantly larger weights in the Workplace Equality Index®.

Telecommunications Services: Another small sector where the Workplace Equality Index® is equal weight. Sprint’s 59% decline the past two years contributed to a slight relative underperformance.

Utilities: One of the better performing sectors the past two years, our slight underweight was offset by outperformance of our constituents in the sector as opposed to those in the S&P 500® Index, proving the “Return on Equality™” theory once again.

For more information please contact us.


Past performance does not guarantee future results and future performance may be lower or higher than the performance presented. It is not possible to invest directly in an index. Index performance does not reflect the deduction of any fees or expenses. Performance data is provided by an independent third party, Solactive AG.

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