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Putting Money Where the Stats Are: The Case for Gender-Balanced Investing – International Banker

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By Nada Shousha, Vice-Chair, Egyptian American Enterprise Fund and Adviser, International Finance Corporation, and Amal Enan, Chief Investment Officer, American University in Cairo

We invest in strong management and solid businesses, regardless of gender”—this is common rhetoric of fund managers, whose industry is historically dominated by men. Less than 1 percent of the $70 trillion of global financial assets is managed by minority- or women-owned firms1U.S. Securities and Exchange Commission: Diversity and Inclusion Report.. As allocators of capital, we’ve become numb to reading management reports of publicly listed companies dominated by men; in fact, only 0.01 percent of all IPOs (initial public offerings) in the United States were led by female founders. We also know that it takes a village to get there, and early backers determine where founders end up. So, where are the investors in female founders along their journeys? Is being gender blind leading us to miss out on the larger opportunities?

Creating inclusive markets that solve problems of limited access to healthcare, education, financial and other services hinges on enabling diverse business leaders. Women are not only half of the market and a large part of the labor force, but they are also drivers of household expenditures. Their inability to access markets excludes entire families from better standards of living.

Countless studies have shown the benefits that materialize from gender diversity in building companies that deliver both financial returns and social benefits. Yet, in the venture-capital and private-equity (VC and PE) industries, which provide entrepreneurs with access to funding when public-equity markets and debt may be less viable sources of capital, women remain severely underrepresented as investment decision-makers and as capable investees and recipients of growth funding.

Billions of dollars are invested in growing startups every year; 2 percent of those dollars go to female founders2Fast Company: “Why it’s incredibly rare for companies led and founded by women to IPO,” Leslie Feinzaig, July 16, 2021.. The lack of diversity is even more pronounced in emerging markets and is dismal in the Middle East and North Africa (MENA), where we both work. Venture funding in the region reached record highs, crossing the billion-dollar mark in 20203Magnitt: “MENA HI 2021 Venture Investment Report.. In contrast, female founders receiving funding represented only 6 percent of the total VC and PE funding available in MENA4International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.. This is not just a missed opportunity; it’s a grave market fail.

When talking to women business owners, we often ask why fundraising is a challenge. Looking at their pace of growth, funding remains a critical constraint. The data reveals that the median female-led business receives 65 percent of the funding received by the median male-led business. Female founders tend to receive funding at the earlier stages from accelerators and incubators, then fall out of the arena in later (and larger) funding rounds. Male-led businesses are more likely to receive second-time funding than female-led businesses—17 percent versus 13 percent, respectively.

One often-cited limitation is, sadly, behavioral: “I’m not investor-ready”. Women are significantly more conservative in fundraising and avoid investors until they reach higher milestones in their businesses. Further challenges arise around where to meet with investors—here, culture plays an important role. Since most networking events happen during kids’ bedtime hours or over drinks, women in MENA tend to be excluded from the conversation. Social norms are one reason why women entrepreneurs are less likely to go after growth industries. One MENA female founder openly said on a roadshow, “I’d love to see male founders get asked: ‘Who’s taking care of the kids while you are fundraising?’” During due diligence, the founder of a last-mile delivery company was repeatedly asked, “But isn’t logistics too operations heavy for a woman?”

By and large, the anecdotes are many, and there is limited data to quantify the challenges. A few success stories do exist, placing some of MENA’s female founders in the spotlight, as was the case for the exit of the ecommerce platform Mumzworld or the acquisition of the events-management technology platform Eventtus by a US-based player. Speaking to women business leaders, each has battle scars to show and a common sentiment to share: “It was lonely. We rarely found women investors on the other side of the table.”

The VC and PE industries are still largely homogenous. Men comprise 90 percent and 85 percent of investment committees in both, respectively. That’s where decisions are being made and where the future of what our markets will look like is determined.

A mere 11 percent of senior investment professionals in emerging markets’ private equity and venture capital are women. Representation falls to 8 percent when excluding China and is only 7 percent in MENA. The picture demonstrates a major lag of 17 percent compared to female representation in business leadership within other sectors5Ibid..

Not only are few women found in the leadership of private-equity and venture-capital firms, but few women are in the leadership of the companies in which these firms invest. Just 20 percent of portfolio companies have gender-balanced leadership teams, and almost 70 percent are all male—even though, of the gender-balanced leadership teams in their portfolios, 87 percent have better decision-making, 61 percent show enhanced governance, and 60 percent have greater ability to serve larger, more diverse markets and consumers6Ibid..

Research confirms that the paucity of gender diversity is not good for business and financial returns. A Harvard Business Review study concluded that gender-diverse fund managers deliver an incremental 10 to 20 percent in returns compared to non-gender-diverse peers7Harvard Business Review: Study by Paul Gompers and Silpa Kovvali.. When VC firms increased female-partner hires by 10 percent, they saw 1.5-percent increases in returns for the overall funds and 9.7 percent more profitable exits.8International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.

An International Finance Corporation (IFC) study found that investing in gender-balanced leadership teams yielded 25 percent higher valuations. The median gender-balanced portfolio company was found to have a 64-percent increase in company valuation between two rounds of funding or liquidity events compared to 10 percent for imbalanced teams.

The imbalances in portfolio companies are correlated with the imbalances in investment managers’ leadership teams, since networks play active roles in sourcing investment opportunities and selecting senior management for portfolio companies.

Female partners were found to be twice as likely to invest in startups with one female founder and more than three times more likely to invest in a female CEO9Women in Venture Capital 2020 Report. According to a recent Harvard Business Review article, this is in line with the finding that VCs are much more likely to invest if they share the same gender or race as the founder.Without the equal representation of female investors, female founders will continue to be overlooked.

If the research unequivocally supports gender-balanced ecosystems, this is enough reason to turn the tide. We need to acknowledge that the barriers are real, and they range from closed networks, biases and inadequate commitment to gender diversity from allocators. To be overcome, a concerted effort is required from multiple stakeholders.

When it comes to perceptions on gender diversity, a disconnect exists between limited partners (LPs), who allocate capital to funds, and general partners (GPs), who manage a fund and invest the capital raised. According to the IFC study, 65 percent of LPs regarded the gender diversity of a firm’s investment team as important when committing capital to funds. However, GPs reported that less than 30 percent of their LPs emphasized gender diversity when making investment decisions. If only 25 percent asked about gender diversity during due diligence and even fewer made capital commitments conditional on gender outcomes, the pledge to diversity should be perceived as weak at best.

LPs who set clear gender-diversity goals for their investments and underscore diversity outcomes in due diligence send strong signals to GPs that the organization is committed to diversity. The goals then feed into GPs’ portfolio managers’ diversity targets. Fund managers would require gender-disaggregated data from their portfolio companies and commit to improving capital allocation to gender-balanced leadership teams. Reflecting diversity goals in their investment processes and portfolio management is a major action LPs can take towards closing the gender gap while maintaining or increasing returns.

The data demonstrates a clear correlation between the performance of gender-balanced investment teams and higher returns. Despite their vocal interest in diversifying their investment leadership teams, less than 10 percent of GPs have strategies for achieving it. It’s a perpetual cycle, as hiring is dependent on networks. With fewer women in investment leadership roles, there are fewer partners who can tap into the talent pool of junior and senior women who have paths to partnership. Similarly, subjective evaluation criteria such as “cultural fit” in a male-dominated industry place women at a disadvantage and feed the cycle. Committing to internal diversity targets for hiring and promoting female staff and managers levels the playing field and improves women’s access to the opportunities already available to their male peers.

As the research shows, investing in gender-balanced leadership teams yields higher valuation and returns. Yet, less than 40 percent of surveyed general partners track gender-disaggregated employment data, and only 33 percent actively pursue diverse candidates when sourcing talent for portfolio companies10International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.. Here again, a concerted focus on achieving gender-diversity outcomes is needed through GPs’ diversity tracking; playing an active role in making the business case for diversity and giving feedback on strategies will go a long way in achieving gender balance.

Accountability toward these actions allows LPs and GPs to make headway in closing the gender gap, generating employment opportunities and providing access to markets, which ultimately results in higher returns.

If you fish in the same pond, you will catch the same fish. Looking beyond the familiar comfort zone and making determined efforts for gender diversity and inclusion will result in growing opportunities across asset classes, investment strategies and geographies. Gender-balanced investors are empowered to deploy their resources within diverse teams and through innovative solutions, creating inclusive markets and bridging the wealth gap. The research on returns on investment is clear—it is worth the effort.

 

ABOUT THE AUTHORS

Nada Shousha is currently a Director on five regional and international companies’ boards as well as Vice Chair of the Egyptian-American Enterprise Fund. She is also an Advisor to the International Finance Corporation’s program Banking on Women. Until 2016, she was Regional Manager for Egypt, Libya and Yemen in the Middle East and North Africa Department of the IFC.

Amal Enan is the Chief Investment Officer of the American University in Cairo’s Endowment and Managing Director at Global Ventures. Prior to joining Global Ventures, Amal was the Executive Director of the Egyptian-American Enterprise Fund, and prior to that, she was part of a team of economists at the Macro-Fiscal Policy Unit in Egypt’s Ministry of Finance.

References

1 U.S. Securities and Exchange Commission: Diversity and Inclusion Report.
2 Fast Company: “Why it’s incredibly rare for companies led and founded by women to IPO,” Leslie Feinzaig, July 16, 2021.
3 Magnitt: “MENA HI 2021 Venture Investment Report.”
4 International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.
5 Ibid.
6 Ibid.
7 Harvard Business Review: Study by Paul Gompers and Silpa Kovvali.
8 International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.
9 Women in Venture Capital 2020 Report
10 International Finance Corporation: “Moving Toward Gender Balance in Private Equity and Venture Capital,” 2019.

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Is This Crypto Investment Strategy Right For Cannabis? – Yahoo Finance

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You got to know when to HODL ’em, and know when to fold ’em.
If you’re a crypto investor or a fan of long-term holdings, then the strategy may already be part of your process. With cannabis awaiting federal legalization in the U.S. and further market maturation overall, some believe hodling is the way to enter the nascent market.
As is with most strategies, nothing is perfect for every investor.

What is HODL?

HODL dates back to 2013 and a drunken forum post discussing Bitcoin (CRYPTO: BTC) prices, namely BTC’s 39% decline in January.
Rather than bail on the plummeting coin, user GameKyuubi stuck with the stock.
He wrote, “WHY AM I HOLDING? I’LL TELL YOU WHY,” adding, “It’s because I’m a bad trader and I KNOW I’M A BAD TRADER.”
He emphasized the importance of holding in a bear market, a belief now championed by many in the crypto space concerning undervalued coins. September analysis from CryptoBuyer reported that 68% of altcoin buyers are hodling for the long haul.
Mark Lozzi, CEO of cannabis industry B2B and B2C platform Confia, said that “HODLing generally helps investors mitigate against short term volatility and downward market pressure, often resulting in hasty decisions that are by and large against your fundamental investment thesis.”
In crypto or otherwise, sources say hodling success is based on successful execution.
Lozzi noted that crypto assets are at risk of failing, leaving the investor to choose wisely before deciding to hodl. “It is still very important that a HODLER choose the right crypto assets that will endure the digital test of time,” he added.
Shaun Heng, VP of operations at CoinMarketCap, said crypto could be a substantial revenue stream for an investor when done correctly.
“By done right, I mean, you hodled for at least five years,” he said. “Hodling six months doesn’t count.”
Heng said the model works if someone is looking for an investment that won’t require much time. Though, he added, “It can definitely be a challenge to see massive fluctuations in your net worth, even if it trends upwards.”
Stefan Ateljevic, a crypto entrepreneur and founder of the review and information website Crypto Blokes, endorses the strategy but notes it isn’t for everyone.
“The price of crypto tends to be volatile and changes on a daily basis,” Ateljevic noted, adding that a good hodler is a stubborn investor who buys on the dip and remains committed to cashing out in the future for more significant returns.
Ateljevic didn’t always practice this investment methodology. Eight years ago, he invested in Bitcoin but didn’t hold the first time around. He told Benzinga that he “pretty much panic sold a good chunk when it was less than $10,000 per coin.”

To his good luck, he was mining Ethereum (CRYPTO: ETH) from day one.

Discussing potential coins worth considering, Ateljevic said, “Hodling for five years could see that give you massive returns on your investment.”

Should Cannabis Investors HODL?

As in crypto, cannabis investors may want to consider hodling if a long-term investment strategy suits their strategy.
Lozzi said a hodl-type strategy could pay off in sectors like genetics and brands though he isn’t as sure about cultivation, which could see commoditization and low-cost producers leading the pack. He noted that the best bet for seeing an eventual ROI in cannabis is investing in leading names, innovators and market share players. “The returns will come,” he said.
Investors often draw parallels between cannabis and crypto. However, Heng cautions that the two emerging spaces are not as similar as some assume.
“On the bullish side for cannabis, it’s an industry that still doesn’t have lots of established players, meaning there is room for competitors,” he said.
Heng then countered his point. “Nevertheless, Bitcoin is a deflationary digital currency, which is something the world hadn’t seen before.” As such, he sees Bitcoin’s market potential reaching heights that cannabis won’t.

Photo by RODNAE Productions from Pexels

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© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Simon Kronenfeld: Emerging investment opportunities – mtltimes.ca

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Smart investment can radically change your quality of life. Investing wisely has been one of the biggest contributors to entrepreneur Simon Kronenfeld’s journey from a dishwasher to becoming major player in Canada’s real estate market. Following his example by finding the right investment can open up a lot of opportunities for the individuals who seek them out. These are the investments that have the potential for growth with minimal risk. These top investment options can help you get ahead in 2021.

Investment has played a huge role in Simon Kronenfeld’s success. Making his way from washing dishes to making major investments in Canadian real estate, Kronenfeld has always shown excellent investment instincts for emerging opportunities. Simon focuses on finding the best risk-adjusted returns, maintaining a diverse portfolio of different asset classes. These are the key areas Simon has focused his investments into for decades, and continues to invest into in 2021.

Eentrepreneur Simon Kronenfeld

Exchange Traded Funds

Exchange traded funds, also known as ETFs, provide a simple way to diversify your portfolio while minimizing risk. By investing into an ETF, you are investing into certain sectors of the market, allowing yourself to capitalize on the growth of the overall industry, not just individual companies. While this somewhat flattens out your gains from the sudden growth of a single company, it also counteracts the impact of individual losing companies on your returns from the fund.  This makes ETFs an effective method of capitalizing on the long-term success of a market sector or group of companies.

Real Estate

Real estate investment turned Simon Kronenfeld from a small business owner to a major industry figure, and it remains one of the most viable (and popular) investments in 2021. Analyzing the future potential to transform the value of land enables smart long-term investment decisions. Kronenfeld’s story is proof that forward-looking investments are the key not just to creating financial value, but to transforming communities for the better. Timing has always been one of the challenges of the real estate market but investors who get it right can make returns significantly above the market average.

Real Estate Investment Trusts (REITs)

With Kronenfeld’s experience in both real estate and accessing the stock market through ETFs, he sees Real Estate Investment Trusts (REITs) as an ideal combination of capital appreciation, practical real estate market experience, and steady dividends. An individual can use REITs to gain exposure to companies like RioCan and Allied properties, receiving 4-6% returns on dividends alone, in addition to capital appreciation. REITs give investors exposure to real estate, while still having liquidity comparable the stock market, in contrast to the illiquidity of real estate.

Initial Coin Offerings

Initial coin offerings, also known as ICOs, have major potential for growth but also carry greater risk and volatility. ICOs are tokens that are sold by startups to fund the creation of new services, apps, and often cryptocurrencies and other blockchain-related products. While this space has the possibility of high returns, smart investors keep only minimal assets of this class in their portfolio, as it shares the high volatility and lack of regulation that makes cryptocurrency a risky investment.

Smart investors pay close attention to both emerging and flourishing markets, enabling them to take swift action when the time is right. Using Simon Kronenfeld’s roadmap to successful investment, combined with your your own knowledge and experience, will enable you to make the right investing choices in 2021.

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Stocks gain as earnings provide some optimism; 10-yr yield climbs

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Stock indexes around the world jumped on Tuesday as U.S. technology shares extended recent gains and earnings reports were upbeat, while the 10-year U.S. Treasury yield rose to its highest in more than four months.

The U.S. dollar was lower on the day as other currencies, including sterling, were supported by investor expectations that interest rates could be increased sooner than some had forecast.

On Wall Street, the technology sector boosted the S&P 500 the most, while recent stronger-than-expected results have bumped up the forecast for S&P 500 earnings for the third quarter.

Investors remain worried, however, about the impact that higher costs, supply disruptions and labor shortages are having on companies.

“The key for the market to going up from here will not be higher multiples, it will have to be higher earnings. That’s why it’s so important to pay attention to what those profit margins do going forward and what the trajectory of GDP looks like,” said Eric Marshall, portfolio manager at Hodges Funds.

Among U.S. companies reporting results on Tuesday, insurer Travelers Cos Inc beat estimates for third-quarter profit and its shares rose. Johnson & Johnson raised its 2021 adjusted profit forecast and its shares jumped 2.3%.

The Dow Jones Industrial Average rose 198.7 points, or 0.56%, to 35,457.31, the S&P 500 gained 33.17 points, or 0.74%, to 4,519.63 and the Nasdaq Composite added 107.28 points, or 0.71%, to 15,129.09.

The pan-European STOXX 600 index rose 0.33% and MSCI’s gauge of stocks across the globe < .MIWD00000PUS> gained 0.73%.

The MSCI index reached its highest in about a month.

 

MSCI World Index https://fingfx.thomsonreuters.com/gfx/mkt/zgvomrjmavd/world%20stocks%20oct%2019.PNG

 

The dollar index against a basket of other currencies was last down 0.22% on the day at 93.73, after earlier dropping to 93.50, the lowest since Sept. 28.

The euro gained 0.25% to $1.1640. Currencies, including sterling and the New Zealand dollar, are benefiting from rising interest rate increase expectations.

Bitcoin last rose 3.49% to $64,201.08.

In the U.S. Treasury market, the yield curve widened, reversing the recent trend.

In afternoon U.S. trading, U.S. 10-year yields were last up nearly six basis points at 1.6407%. The yield hit a 4-1/2-month peak of 1.6440%.

The U.S. 5-year yield, which has been on a tear the last two weeks, was last down at 1.1586%.

Oil prices climbed and were near multi-year highs as an energy supply crunch continued across the globe. Brent crude rose 75 cents to settle at $85.08 a barrel. U.S. West Texas Intermediate (WTI) futures rose 52 cents to settle at $82.96.

In other commodities, U.S. gold futures gained 0.15% to $1,769.70 an ounce.

 

(Additional reporting by Tommy Wilkes in London, Shreyashi Sanyal and Devik Jain in Bengaluru, Karen Brettell, Stephanie Kelly and Sinead Carew in New York, and Saikat Chatterjee; Editing by Jason Neely, John Stonestreet, Steve Orlofsky and Cynthia Osterman)

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