Patricia Lizarraga, Hypatia

That's what ultimately led to the WCEO ETF. That's great. So when you're not working at Hypatia Capital and you're not outselling and distributing WCEO, what do you like to do for fun? What does your weekends look like? What does life outside of the office look like for you?

Sure. So there's, I would say I have two main hobbies and they're polar opposites. I love sailboat racing. So, yeah, so I usually during the summer, I spend some time on sonars and Oyster Bay at Swanica and I love that. And, and then on my non less competitive side, I love botanical illustration. So I take a lot of classes at the New York Botanical Garden online. That allows me to do that from anywhere in the world. I've taken also online botanical classes from Edinburgh. So those are, those two things in my family keep me pretty busy.

That is a, that's such a cool hobby. I tried sailboating once I was on vacation. They gave us a little dinghy sailboat and it took me, I don't know, 45 minutes to roll the thing over. So that is such a neat, a neat hobby.

Well, the, the, the great thing about the keelboats is they can't roll over. I started in a dinghy too, and it was a very wet day. And then somehow I found a place that taught J24s. So I try to get, try to get in a, in a small keelboat and, and tell me how it goes.

Well, that's fun. That, that would make for, that would make for fun summers. And that's really, really neat. So I'm glad you shared that. So what made you launch Hypatia Capital? Is it strictly to, to launch the ETF? Do you guys do other things?

So again, we started 15 years ago and we really started as an advisory shop and building our network of senior women executives in order to service them from a, from a more advisory investment banking point perspective. And, and that grew into a very large network and we would hold events about private equity, about M&A, but then we wanted, then we started looking at all asset classes. So it was an evolution into how do we make investing in women and leadership a mass product, right? Because by definition, alternatives are a product that is appropriate for people who are, accredited investors and, and up. But we really think that investing in women and leadership is something that is appropriate for, for all individuals who believe in equality.

Yeah. And that's, that's great. And so what does Hypatia mean? It's got to have a, it's got to have a secondary meaning.

Sure. So, uh, when I read, when I was researching a name for our firm, I researched first woman, uh, mathematician and first woman astronomer. Uh, and the name that comes up is Hypatia. She's the first published female mathematician known and about fifth century, um, AD. She was the last, one of the last of the elite Neoplatonists in Alexandria, which at that time now is, now is Egypt. Then it was Greece. Yeah, that's cool. That's, that's, um, that's fun. It's always,

I love talking to entrepreneurs and how they come up with, the names and how they came up with, uh, their branding and everything. So that's very cool. I'm glad you, I'm glad you share that. So let's dive into a little bit about WCEO, the ETF. So tell me about the strategy. Um, how is it, how do you work? How's it work? Um, what's it investing in the index, all, all the things.

Absolutely. So Hypatia investment thesis is that women CEOs will outperform, right? So first, what does WCEO do? WCEO invests in all American public companies that have a female CEO, small to mecca cap. Okay. Why do we invest in those companies that have women CEOs? Because our investment thesis is that women CEOs outperform. And the question is, why do they outperform?

And our investment thesis. Well, that was my next question. Yeah. It's because it's harder for women

To get to the CEO role. So the ones that do make it by definition are extraordinary in that CEO cohort cohort, right? They have a, they have a harder time getting there. So they have to jump through extra hoops or do something that makes them, uh, extraordinary. So the question is, okay, if you believe that women outperform and you're going to invest in women CEOs, how do you isolate that female factor? And that's where the construction. So go ahead.

So when, when you screen and source these opportunities and find these companies, how are you weighting the index? Are you, are you market weighting it? Are you equal weighting all of these companies? How is the index constructed?

Sure. That's a great question. And what we did is we tried to isolate the female factor. So we thought, what are two factors that we think are making the selection or the weighting process not be about women. And there's two primary ones. It's both size and industry. So we have companies that range from, 200, $200 billion plus market cap to right around 500 million. And so unless we equally weight them, that would be more about size as some other, large, uh, ETFs would be rather about size than about the actual female factor. So we thought equal weighting would eliminate that factor. And the second factor that we think is important is the industry factor, right? Because there are many more women in consumer discretionary than there are in energy. So because energy, but,

So how often are you running a new screen and how often are you rebalancing the index?

Sure. So we're permanently looking at what's going on in our portfolio because we have the discretion to, uh, to, to, to, to veer from, from, we don't have, we're not benchmarked to the WCO index. The WCO is index is calculated after the ETF decides what it's doing. Right. So, so because of that, we're constantly monitoring what's going on, but we rebalance it every month. So every month we, so, so anytime a company no longer has a female CEO or on the reverse, if a company, uh, appoints a female CEO, we will buy or sell that stock that same month and then reweight the index accordingly.

It's very active. So over time, yeah. So over time, are you finding you're adding more names to the portfolio because more, we, more females are taking on leadership roles. Is that something that you're seeing in your, in your data and your index? So, so in, in our ETF, the ETF itself only has three

Months. So I think that it's, we can't, uh, say there's a specific trend, but in the index, which obviously is different than the, than the, um, than the ETF, we have seen an increase of women CEOs over the five years that we have created the data for. It's slow, but steady progress. We're going in the right direction. We would like it to go faster in the right direction, but it is going in the right

Direction. Yeah. Your index just ends up being the S&P 500 in 20 years. That would be great, right? Yep. Or half of it. So, so yeah, half of it, half of it. So, um, what, before we kind of move in a different direction and you touched on this briefly, but what do you think personally drives that female alpha factor, right? Like what, what is it that women are, are better at than men that are allowing

Them to drive alpha in these companies? Sure. So we believe what's driving women's performance is how difficult it is to get there, right? How they each, we have 124 companies in our portfolio in all 11 gigs and subjects of which there are many more. Some of these are big companies. Some of these are small companies. Some of these are in, uh, industries like consumer products. We have two defense stocks, right? We have, we, we own both general dynamics and North, North grandma. Uh, we own, uh, we own Occidental oil. And so the competencies that one would expect in one industry might be quite different than what the, uh, what the competencies one might expect in a different, uh, industry. We have quite a bit of biotech in our, in our, um, in our fund as well. So

Athletes. Yeah, no. And, and even in the short duration, the ETF has been out. We've, I've noticed the outperformance. And, um, so I think what you're doing is, is wonderful. And I agree with you, there've been hurdles in place and in order to get there, they have to be, um, exceptional performers. Um, and so I, I look forward to continue to, to track it and track the performance over time. So let's pivot just a little bit. Um, I want to talk about kind of how long it took you to get this product to market, kind of start to finish. What did that look like from, the ideation of, of the idea and to, having that first trade take place.

Way back to the founding of Hypatia Capital, when I started realizing, wow, I want more female clients and they're so good at what they do and they're the top performers of my clients, we can go back 15 years, but I think it was seven or eight years ago, I saw a clip of a, um, of, of a, it was a head of a marketing of a company called Quantopian and Quantopian was a trading algorithm company where traders could set up their own algorithm and, and, and, prove that their investment thesis performed. And the head of marketing actually, she tried doing it with women CEOs. And so, uh, our methodology today may be a little bit different, but I, that was like this planted the seed. Well,

Ourselves. So do we also have, uh, do a lot of it ourselves. We have a lot of the same service providers. Um, you had mentioned Ultimis and they do a great job for us. So do you, it sounds like you had launched your own, your own trust. You're not on a, on a white label platform.

We, we are in a, we are in a shared trust on two roads.

Oh, okay. Are you, yeah. Are you on Ultimis's trust or so what may, what drove that decision in from either creating your own trust? Cause you had mentioned, you have some other products in mind, um, to kind of white labeling. I know that this is a major decision for a new issuer or for even an existing issue, or if they want to make a, make a change. So what drove that decision for you to, kind of get on some, uh, get on an already pre-established trust to, uh, or starting your own kind of what, what drove that?

So what drove it is we want to focus on the creation of opportunities for investors to invest in women in leadership. And that's what we've been studying for 15 years. And that's where we have so many contacts, so many data points that we want to focus on that. And what we didn't want to focus in is understanding and having to, uh, and having to become experts at the creation of an ETF at the, um, creation of indices. We wanted to focus on what we know, which is isolating the female factor. And second of all, getting the world to understand what the female factor is and why it outperforms. Because today, the only place where you are, you have more money right now going into early stage female focused funds, then you have money going into gender lens

So that's our medium term plan. Wow. yeah, it's, you've got a lot going on, uh, outside of just, uh, being an investment manager, portfolio manager, it really sounds like you're taking a lot of time to get involved and kind of push, um, a movement and, and, and idea and, kudos to you. That's, that's a lot of hard work. And so, um, do you, so just stemming off of that, uh, terms of educational series, are you, are you currently working on that or is that something that you're going to be doing in

The future? So we're currently in pro and conversations with a, uh, association that, that really brings together a lot of young women and they are asking us to figure out what the right educational platform to get those young women, um, financial literacy education so that they can, at a young age, start investing. let's know what Sally Krawcheck says, who, really says it so well. And I, I urge everybody to, to, to really consider her platform because it's very specialized in this way, but she says, invest early. The earlier you get started, these, the more likely you are to have that nest egg that everybody wants at retirement.

Yeah. And, uh, I've, I've been following Sally for a very long time. I've not had the opportunity to meet her. Uh, and I, I watched her, I believe she was at, she at Merrill and then she launched her own firm. I, yeah, yeah. And so, and she does a great job marketing and I've been following her for a while. So the two of you together should be able to, to do some damage out there in terms of, of, of helping this movement, but amazing job. So let's go back to product creation. I have a couple more questions there. Um, you launched on the New York stock exchange. So what drove that decision? You had other, there's other options out there. So what drove that decision to kind

Of launch on the NYSE? So, uh, we, we, we, we, we were torn. We think Nasdaq is a great option and has a female CEO, but guess what? So does a New York stock exchange. So we thought that was really interesting. So they were our two finalists and ultimately the New York stock exchange, Oh, I think two thirds of our portfolio companies are New York stock exchange listed. And therefore we thought that that was probably more synergies from that point of view. Um, and that ultimately we could potentially create more content, more events as we got to know our portfolio better because there were, the ratio of, of, of our, of our, um, actual, um, actual in, of our actual companies in our portfolio was much larger.

No, that's interesting. So going back to, uh, kind of distribution, you mentioned that. So how is, how are you approaching at this point distribution and getting W CEO out there?

Yeah. Distribution is the hardest part, right? How do you get people to know about your product? How do you get them to trust your product and how do you get them to pull the trigger? And so the good news is that the, I would say that the, the financial press has taken a liking to the ETF because they love the fact that it's a pure play and that we are about investing in women and that's all we're saying. And so it's, and it's, and, and if you say, what does a W CEO do? And you look at the pictures, we, we are, as far as I know, the only ETF that has the pictures of their CEOs and their top holdings. And there's a reason for that, right? Because if you see the

Especially for firms like yours and mine that are kind of smaller and, and new and boutiquey.

Yeah. If you look at the top, the list of top women, wealth managers, best in state, whichever of those lists you look at, the vast majority of the best advisors are Morgan Stanley and Merrill Lynch, but Merrill Lynch and Morgan Stanley won't put this on their platform until we're at a certain size. So that's a real challenge for us because those are by definition, people who would be interested in hearing what we have to say. And I think likely to give it some consideration.

Yeah, I, I agree. And it's definitely makes things a little bit more difficult and I wish it was different. I wish everybody got a crack as soon as we were listed to be able to, to be in these platforms. It definitely makes it a challenge for us who were starting really from scratch. And so I look forward to the day where you reach those hurdles, because I think you're going to have tremendous success in that, in that distribution channel. And so, um, again, I, I hope you, uh, one day get there and, and, and seize that opportunity. But I think the other thing I wanted to say is I, I think you're doing a wonderful job at, on LinkedIn. I see you almost every time I log in.

So I think on LinkedIn, the people that are in your network, if you post regularly, and if you, we have 124 stocks and probably what you see, one of the things we love to do is every time one of our company posts say how proud we are to be shareholders and put that in there and put in how great the CEO is. And so I think that's broadening our network quite a bit because we're reaching out to people that, I don't know that I had crossover with the, with the leadership team of ADP. I don't know that I'd crossover with the leadership of general dynamics. And so by really promoting and highlighting who's in our net in, in our, in our fund, what are, who our holdings are,

In your ETF. So you don't know exactly what's working. Yeah. I find that to be, uh, I shouldn't use the word frustration, but it's until you get to 13 F time, if somebody is a larger advisor, you can see who's in there. It would be nice to know because in any other industry, right? If I sell you a product, I know that I can continue to build a relationship with you. I can try to increase my retention. But in this industry, a lot of the, the vast majority of holders of even our product, um, I have no idea who they are. Exactly. So, so, um, so on Twitter,

Where there's so many celebrities and so many high, uh, high visibility individuals, they, they love to tweet and they love to talk and they're talking to their followers, but there's not a lot of response. So actually, if you go in and, and, and, and look at a very, not, maybe not Kim Kardashian, but a different kind of a different social media engager, the, the person probably only, 20 people may have seen their tweet, but only two comment on it. So you're really commenting to that person in particular. As we believe that, that many of those people would love to know about the WCO, but there's no way to reach them other than by answering their Twitter. So I don't,

Things, but it's fun. Yeah. That's what I was just going to say. That's the best part. I think about being an entrepreneur is that you try things and sometimes they work. Sometimes they don't. It's this, it's this large puzzle that we're constantly trying to solve. And again, I think you're, you're doing a great job of getting the word out there and, and highlighting, highlighting what you're doing. So are you focusing primarily when you're out there selling this ETF, the target market being women and being women financial advisors, is that really the primary sales target for you, uh, for the CTF?

So we think there's definitely a natural affinity of women wanting to understand what we're saying. Right. And we think in the financial services sector, the men are also very interested in what we're saying because men advisors have female clients and they want to know, is this something that perhaps would be of interest to my female client? Another part of our client base that is not women are girl dads. Do you get, I'm one of them, right? Quite a few men say, I want my daughter thinks this is amazing. And so, is that, is that an appropriate gift to your young daughter?

And I, we think that's a real thing. Absolutely. Uh, I've, I just, I just convinced my six-year-old daughter to take the money out of her piggy bank and put it in the bank. So now I'll have to go home and convince her to, to buy WCEO with a little bit, a little bit of birthday and, uh, Christmas money.

Exactly. She, even if she has $25, she could do it. And so we think that that, we think that there is, uh, the WCO is for anybody that believes in equality because you can actually balance your portfolio from a CEO perspective, 50, 50 fairly easily. Right. And have it be appropriate. You could have half of it in a large cap stock allocation and have been a small cap. We, we track to the small cap, but we actually have large, medium and small and almost equal proportions. Um, but because it's equal weighted, it, it, it's why it's a small cap allocation stock. So we think that, we think this should be interested to everybody who believes in equality, but we think that it might grab the attention of women first, because there are a lot of women who are,

Don't exclude the men and certainly not the dads. Well, that's great. I was trying to do some research and do you have any competitors? Are there any competitors to the WCO or you the pioneer here?

As far as we know, we are the first, the first strategy that invests in women CEOs and the public markets. There are strategies in the private markets, early stage. There are early stage investors that are focused on investing in women founders. And there's a number of firms that do that. And I love each and every one of them. And I try to invest in as many of them as I can. But again, those are only appropriate for wealthy women. What about the person who has $20,000 in their IRA right now? Shouldn't they be able to invest in women as well?

Absolutely. I couldn't agree more. And good for you being first. There's always that push for being first in a space. So I think you're going to have a lot of success. And where do you think, we talked about this a little bit, but when you're sitting down with advisors and you're talking to them, where are you advising that they put this in their overall allocation in terms of model portfolio

Construction? This fits in the small cap allocation. That is our benchmark. Our benchmark is the FT Wilshire small cap index. And again, it's a small cap allocation because it's equally weighted and has a lot, has more small cap, has medium and large cap, but because it's equally weighted, it's going to correlate most closely in that, in that small cap. However, one could say, I want more than just a small cap allocation in this because I want more gender balance. And also we have the portfolio has 124 names and it's, it's fairly well balanced between small, medium and large. What it's not going to do is replace your, your S&P 500 because it does not have any mega cap in it. Well, it has to their borderline, right? And the mega cap, as we know,

Is what drives the S&P. I want to take the time to, to thank you for, for being here. And I really learned a lot and I think people are going to learn a lot about this from you. And, and I just want to say thank you for taking some time out of the day. So how can people learn more about your product and where should they go to, figure out if this is something that they want to implement in

Their portfolio? Sure. So on our website, www.wceoetf.com is the first place to start. And there there's some basic information that's in video and in written format and the pictures of our top 10 holdings. Our, our fact sheet is downloadable straight from there. And there's even a link to send to your advisor. And we're happy to get on the phone with any advisor who wants to understand a little bit more of the mechanics and, and, and the fact, the biggest, I don't know if you're getting this, but the biggest pushback we get from, from advisors is that we have so few AUM that they think there might be a liquidity risk. But we, so what advisors need to understand is the ETF is as liquid as its smallest stock. So we are no less risky than a,

Educational thing that, size is not indicative of liquidity. And so I, that's just really comes down to an education point. So Patricia, again, thank you so much for doing this. I had, I learned a lot and I think what you're doing is wonderful. I'm going to peel $25 out of my daughter's account and, and buy WCEO. And I just gotta, I gotta open up her little brokerage account. But again, thank you for being here and I appreciate your time.

And thank you for the opportunity. And I love, I love this new initiative by New York Stock Exchange.

So congratulations.

Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.