With June being Pride Month, advisors and market participants are paying renewed attention to strategies relevant to the LGBTQ+ community. That should also be happening throughout the rest of the year, and the good news is that the number of investments relevant to the LGBTQ+ community and their supporters is increasing.
While it’s not a dedicated LGBTQ+ exchange traded fund, the Calvert US Large-Cap Diversity, Equity and Inclusion Index ETF (CDEI ) merits a place in this conversation because, as its name implies, the actively managed fund priorities diversity, equity, and inclusion principles, which are important to members of the LGBTQ+ community as well as their allies.
With that in mind, CDEI, which debuted in January, could find itself at the right place at the right time. More investors, particularly those in younger demographics, want access to strategies that prioritize DEI virtues and LGBTQ+ allyship.
“Nearly half of U.S. investors in a recent Morgan Stanley survey want opportunities to invest in LGBTQ+1 and inclusion, across a broad range of products and strategies. This demand increases substantially among LGBTQ+ investors (86%), heterosexual investors with an LGBTQ+ household member (76%) and younger investors (67% of Gen Z and 56% of Millennials),” noted Morgan Stanley.
CDEI Could Have Other Advantages
As noted above, CDEI isn’t a dedicated LGBTQ+ ETF. However, investors should note its adjacency to that theme because, at the moment, there are not many such ETFs to choose from.
Additionally, due its active management philosophy, the potential exists for CDEI to offer DEI purity, thereby enhancing its relevance as an LGBTQ+-friendly strategy. That could broaden the audience for CDEI, with younger investors potentially being a driving force.
“The business case for LGBTQ+ investment products includes both investors who identify as part of that community as well as younger investors: Investors born after 1980, regardless of their identity, could play a significant role in demand for these products,” added Morgan Stanley. “A majority of Millennial and Gen Z investors expressed interest in finding investment options that advance LGBTQ+ equity and inclusion.”
Home to more than 350 domestic large-cap equities, CDEI is also a credible option for investors seeking growth style exposure, as the fund allocates 42% of its weight to tech stocks. In theory, a DEI strategy should be sector-agnostic. However, it can also be overweight on groups that score well in terms of DEI priorities — which tech does. Apple (AAPL) and Microsoft MSFT combine for almost 29% of the fund’s roster.
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