Where Are All the Alpha Females?

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    Stockholm (NordSIP) – “The progress towards gender parity in fund management has virtually ground to a halt,” is the unequivocal message of Citywire’s Alpha Female Report’s latest iteration. Analysing Citywire’s comprehensive database, currently tracking 18,015 portfolio managers globally, the report reveals that despite a proliferation of diversity initiatives in the industry, there is no sign of improvement. Asset management still struggles to attract and retain talented women, and the pool of successful female portfolio managers remains narrow.

    Numbers don’t lie

    For eight years in a row, Citywire has been tracking what they describe as a “slow but steady progress” on gender diversity in the asset management industry. This year, the analysts’ frustration is palpable as they report that the percentage of female managers has ‘increased’ from 12% to 12.1%. In the seven years since the first report was published, this percentage has moved up by a mere 1.8%. “A slow climb is getting slower,” conclude the authors.

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    The few women who do end up managing money, meanwhile, tend to run much smaller funds compared to their male colleagues. This might have to do with the sort of strategies typically assigned to female managers, according to the report. Women often run niche funds, focused, for instance, on single-country emerging markets or consumer discretionary stocks. This narrow specialisation makes women more vulnerable in uncertain times. Given the current market conditions, it might also partially explain the low percentage of new strategies assigned to female managers over the past 12 months, just 6.2%.

    What is the problem?

    Attracting female talent is one of the challenges. The perception of asset management as personified by a greedy Gordon Gekko seems rather persistent. The report quotes a study conducted by the Fondsfrauen network in Germany and the University of Mannheim, revealing that young students generally associate asset management with risk-taking and find it unsustainable.

    Given that only a few talented women are willing to enter the pool of potential fund managers, there is even more reason to keep and promote them. Yet the industry seems to be failing in this respect, too. Practitioners offer some explanations. “The hierarchy in portfolio management is still stricter than in other departments,” comments Manuela Froehlich, co-founder of Fondsfrauen. “The competition is still very high, and turnover is still low. This makes it harder to create spaces and opportunities because people are not leaving,” adds Paula Robinson, director of US equity manager research at global advisory firm Willis Towers Watson.

    The Nordics – far from best in class

    Although the overall numbers are bleak, there is a significant regional dispersion. Three of the Asian tiger economies are leading the way, exhibiting the highest percentage of female fund managers: Taiwan (29%), Hong Kong (25%), and Singapore (20%). Several European countries make it to the top, too: Spain (21%), Italy (20%), and France (18%).

    Despite their reputation for gender diversity, the Nordics rank further down the comparison. Sweden is the only one to make it to the top ten, with 17% of fund managers in the country being women. It’s not too impressive, but considerably better than the mere 7% that Denmark can boast with. You can find Finland (11%) and Norway (9%) right in the middle of the pack.

    Diverse teams rule

    Looking at the risk and performance of funds with a gender lens, the analysts discern a pattern that seems to persist over the years: whether male or female, flying solo as a portfolio manager is hardly the best idea. “For every unit of risk a mixed team took, it yielded a return of 0.70%, surpassing the returns of solo male managers (0.41%) and female solo female managers (0.24%) and continuing to show that teams work best,” observes Citywire.

    This conclusion should send a powerful message to asset management firms, emphasising the business case for fostering an inclusive and dynamic culture. It appears that promoting talented women and encouraging diverse portfolio management teams is also a shortcut to better risk-adjusted returns.

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