Goldman Tells Investors to Bet on Gender Equality for Bigger Bond Returns

(Bloomberg) -- Goldman Sachs Group Inc. says it has a winning strategy when it comes to navigating tumultuous times in the global government bond market: betting on emerging-market nations that are ahead of the curve on gender equality. 

A portfolio of debt from the eight developing economies with the best track records of empowering women would have outperformed the eight with the worst by about 1% over the past seven years, according to an analysis by the investment bank.

That overall outperformance isn't immense. But the excess returns are more pronounced during periods of high volatility, strategists Sara Grut, Teresa Alves and Kamakshya Trivedi wrote in a report this week. That suggests it may work well in the current environment, with the world's bond markets unsteadied by high inflation, the lingering threats of the pandemic, and moves by central banks to start tightening monetary policy.

“If you're in a high volatility environment, this strategy should perform relatively well,” Grut said in an interview. “Even if investors choose to focus only on certain aspects of gender equality, they are likely to see an outperformance over time.” 

The strategy is based on Goldman's Womenomics Index, which rates emerging-market economies according to their track records on women's education, labor, health, agency and power. The latest rankings show Lithuania, Latvia and Serbia scoring the highest, with Pakistan, Iraq and India at the bottom. 

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Of course, correlation doesn't mean causation, and there are other factors in play, too. Goldman found that governments that rank better on gender equality also tend to have higher credit ratings and lower yield penalties in the bond market. 

“Women lag men across the world, and this is especially pronounced in emerging markets, with emerging Europe and Latin America recording the most equal outcomes and the Middle East bringing up the rear,” they wrote in the report.

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