Gender Diversity Improves Performance

    Stockholm (NordSIP) – For a couple of years now, Willis Towers Watson (WTW) has been tracking the state of diversity in the asset management industry. On 7 March, just in time to celebrate the International Women’s Day, the company published its latest report, Diversity in the asset management industry: on the right track, but at the wrong pace. This time around, the ambition is not just to take the temperature across several dimensions of diversity and inclusion (DEI) but also to probe the pace of change.

    The Gender Diversity Premium

    “Fundamentally, we believe greater diversity leads to better investment outcomes,” state the authors of the report. “Our analysis continues to support this, with investment teams in the top quartile of gender diversity outperforming the bottom quartile by 45bps per annum in terms of net excess return. Crucially, greater diversity also makes teams more representative of the people on whose behalf they are taking decisions,” says Chris Redmond, Global Head of Manager Research at WTW. The relationship holds for to the largest asset classes, with equity and credit displaying a gender diversity premium of 46bps and 14bps a year respectively.

    To come to this conclusion, WTW has collected detailed diversity data for over 1500 investment strategies, reviewing primarily gender data, as it is currently the most widely available across regions. They have compared this against the excess net returns of strategies with a 5-year track record.

    The main conclusion of the WTW report is that while the asset management industry is on the right track, it may be going too slow. “Progress requires ongoing evolution and meaningful action from asset owners, advisors, and asset managers to ensure we are all on the same journey and going at the right pace,” state the authors.

    Going Beyond

    The report pushes managers to engage with diversity beyond a mere quantitative exercise. “Alongside the data, we believe asset owners and advisors should look beyond the numbers and form a robust qualitative view on their manager’s DEI [(Diversity, Equity and Inclusion)] and culture to really understand where their manager is, where they are going, and how quickly they will get there. Focusing on any single number, such as diverse ownership, can often miss the bigger picture and forego an opportunity to identify current and future DEI leaders.”

    Going forward, WTW aims to continue to push asset managers in the alternatives space, e.g., liquid diversifying and real asset strategies, to provide both diversity data and performance data across platforms. “This will enable us to expand our analysis and monitor the diversity premium at an even more granular level over time,” the report argues.

    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.

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