According to recent statistics women are making up an increasing percentage of the pool of financial advisors. However one area where they are not making headway is in the world mutual fund managers. Recent statistics from Morningstar show that women remain a distinct minority among professional money managers. Laura Pavalenko Lutton writes:
We examined the gender of U.S. open-end fund managers in our database and found that only 9% are women. Women exclusively run only 2% of assets under management in the $12.6 trillion U.S. open-end mutual fund universe. The likelihood that a woman is managing a core multiasset allocation fund is even lower.
This paucity of female money managers is confounding. In our 2012 book, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere, we noted this as a likely ‘market failure.’ It is not clear exactly why this disparity persists. Meredith Jones, author of Women of the Street: Why Female Money Managers Generate Higher Returns (and How You Can Too) tells Institutional Investor:
“While the legal and medical fields, which were historically also male dominated, have seen an increase in female participants, women in finance remain woefully underrepresented,”…For every female hedge fund managers, there are 80 male mangers, she contends. There are a lot of reasons people can point to for this lack of diversity in the financial industry, Jones says, from networks to work-life balance, gender bias and a lack of desire among women o pursue business and finance careers. “It’s difficult to single out any one, two or even a handful of factors,” she concludes.
Whatever the case we have argued there are two good reasons for investors to embrace gender (and other) diversity. The first is that it can help investors, and their teams, avoid group think. In an earlier post we wrote:
One of the great challenges in investing is group-think. Investment teams have a tendency to engage in self-censorship and confirmation bias. In pursuit of consensus teams end up forgoing contradictory information and opinions in pursuit of a clear path forward. Diversity of opinion, temperament and thought can if properly managed can help make for more robust decision making.
Another area where focusing on gender may help is in motivation. Earlier this year we tackled the subject in a post:
In addition to thinking differently it also is worthwhile thinking about the motivation of women who come to lead their own investment shop. Those women have likely experience explicit (and implicit) bias during their careers. To get to the point where they are in charge of a portfolio (or firm) shows a level of motivation that is not easily matched by male counterparts who did not have the same challenges.
Whatever is driving the gender disparity in portfolio management it is in incumbent for investors to note how they reap advantage from what is a potential market failure. Whether it be identifying more diverse teams or managers with inherently more motivation (and grit) it behooves investors to look at ways at building portfolios with this in mind.