2017 Performance Attribution for Workplace Equality Index®

Thursday, January 4th, 2018

The Workplace Equality Index® returned 21.52% in 2017, less than a third of a percent behind the S&P 500® Index. We originally created the screening process used in the Workplace Equality Index® as a way for LGBT+ oriented foundations to satisfy their fiduciary duty for broad equity market exposure while aligning with their support of companies that treat their LGBT+ employees with dignity, respect and equality. As an equally-weighted index, our small- and mid-cap exposure had a negative impact on relative performance in 2017 as the largest stocks in capitalization-weighted indices provided outsized contributions to return based on their increasingly large weights.

From an attribution perspective, we offer the following thoughts on the performance of the Workplace Equality Index® versus the S&P 500® Index for the period January 1 through December 31, 2017.

The top five contributors to performance for the year were Chemours (up 127%), Wynn Resorts (up 95%), Boeing (up 89%), NVIDIA (up 81%) and PayPal (up 87%). The five worst contributors to performance were Avon Products (down 57%), Sears (down 61%), General Electric (down 45%), Mattel (down 44%) and Sprint (down 30%).

The best performing sectors on an absolute return basis were Materials, Real Estate and Information Technology. Only Telecommunication Services posted negative absolute returns for the year. From a contribution to return perspective, our underweighting in energy combined with stocks that outperformed their peers proved beneficial adding 1.62% to total return. Our underweighting in Information Technology resulted in a 1.67% drag on relative return versus the S&P 500® Index.

The bulk of the underperformance came from the consumer sectors and technology. Our equal-weight methodology had a negative impact on performance relative to the benchmark. For example, the index’s average weight in Apple was 0.50% which gave Apple a performance contribution to the index of 0.21% for the year. Compared to the benchmark’s average weight in Apple of 3.74%, providing a performance contribution of 1.62% for the year it made it hard to keep up with the S&P 500® Index. This theme played out in the large technology companies that have come dominate market-cap weighted indices such as Facebook, Alphabet, and Microsoft. We believe that the Workplace Equality Index® is well positioned should the tech behemoths see their gravity-defying price appreciation come back to earth.

The stocks in the index outperformed their sector peers that failed to meet the Workplace Equality Index’s equality-minded selection criteria in a majority of the economic sectors. We have documented the tendency of companies with LGBT+ inclusive workplace policies to outperform their less-progressive sector peers in our white paper, Return on Equality, the Real ROE: The Shareholder Case for LGBT Workplace Equality. The performance of the stocks in the Workplace Equality Index® in 2017 continues to show this trend is alive and well.

 

For more information please call John Roberts directly at 303-312-4915.

 

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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