Publications
Partners
When considering demographic factors such as gender and age in financial services, and with regard to financial products, we almost always consider these descriptors in relation to the client and almost never in relation to the service provider.
It is not exactly clear why clients spend so little time considering the demographic composition of those who render them services – whether it be asset managers or advisers – and perhaps a homogenous client base perceives the existence of a homogenous service provider base and vice versa.
In reality, however, we know homogeneity is the very last term that should be associated with investors’ financial needs – their goals and circumstances, and accordingly service providers too, should reflect this variety especially in terms of gender.
There are very few women money managers
In South Africa, less than 10% of all fund managers are women (according to research conducted at Wits University by N. Archary published in 2016). This number has remained flat for close to a decade. In December 2015, 15% of the world’s portfolio managers were female (as per research by O. Wyman disclosed in Women in Financial Services).
Granted, the representation of women in broader roles (chief operating officer, CEO, marketing, client services, distribution) in the asset management industry is higher than this number. However, rarely do you find a woman in the driver’s seat as a decision-maker with a say over what investment instrument to buy and sell, and when.
Not only are there few female portfolio managers, but women also have a smaller allocation of funds entrusted to them to manage. The findings in the above-mentioned Wits study indicated that less than 6% of the total assets under management in the South African unit trust industry are being managed by female fund managers.
All over the world, the state of play in terms of gender diversity in pure money management roles is abysmally poor. This is the case even in SA, where gender equality and equal representation are strongly promoted and have even been written into policy. It is obvious that this has evidently not filtered through to investment management.
Why is there so little gender diversity in money management?
The low prevalence of women in investment management roles appears to be driven by both “top-down” and a “bottom-up” factors.
“Top down” refers to what I term environmental contributors – this is a manifestation of both conscious and unconscious biases. These include:
- Unfair deep-seated misperceptions: Research conducted in the US as far back as 2000 by J. Oakley in the Journal of Business Ethics and 2015 by R. Aggarwal & N.M. Boyson in the Review of Financial Ethics, and affirmed in SA in 2016, reveals that women are stereotypically portrayed as less competent and less capable money managers.
This stereotype is perpetuated despite evidence to the contrary and appears to directly affect the willingness of clients to choose funds managed by women. In investing, it appears competence is expected to come in a package that is male and therefore the alternative is treated with unfounded scepticism.
- Overvaluing innate male investor characteristics: The environment also appears to place disproportionately high value on the innate behaviour of men in their role as investors, emphasising characteristics such as overconfidence, unbridled risk-taking, fierce competition and a ruthless determination to win as being necessary traits in investing success.
- The glass ceiling: Women in asset management wrestle with an old boys’ clique, as put simply in a 2014 Financial Times study titled Women in Asset Management: “white men hire white men”.
As awkward as that truth is to hear, the study further elaborates on the pervasive reality that women only get as far they do in the industry because they are outside the impenetrable “inner circle” as the culture of sameness is perpetuated.
- Outdated organisational practices: A lack of willingness to embrace flexible working arrangements; a disinclination by male leaders to sponsor and mentor women; and an insufficient respect for the multi-faceted roles women play in society, families and businesses make the never-ending balancing act of work and life virtually impossible to successfully navigate.
Ironically, because more men have been recently expressed the desire to be more active in family life, flexible work options have started to gain greater traction.
“Bottom up” refers to factors intrinsic to women themselves. In my opinion these include:
- Lack of a pipeline: Not enough women either join the investment industry and/or too few women stay in the industry. Investing is an endeavour of time and staying the course is critical to earning trust and confidence.
Many women cite the environmental factors outlined above as reasons why they eventually and prematurely opt out of the investment industry. In this case it is too challenging to continue, not because of the work required ?but because of the complexity and perceptions that abound.
- Self-doubt: Young girls and women don’t suffer from a lack of confidence per se, but they are not raised with a “winning at all costs” mentality. This can be perceived as having low investment conviction, which in turn can cause women to doubt their potential impact.
Why should clients seek out diversity in their asset managers?
There is little to gain from a unilateral debate on whether women are better money managers than men or vice versa. The lack of sufficient data points (especially in terms of number of funds run by women) makes it difficult to arrive at a comprehensive conclusion in this regard.
More germane to the discussion is that women possess the propensity to bring a range of differences in many important facets of investing that would be for the critical benefit of client outcomes.
Diversification is widely understood and embraced as the cornerstone in portfolio management, yet when considering who is actually managing one’s money – there is a remarkable lack of diversification.
Female and male fund managers are not identical in the way they perceive investing and this lack of similarity enhances client outcomes as opposed to detracting from them.
For example, women appear to have a lower propensity for risk of loss in managing their portfolios (borne out by women-managed funds sharply outperforming their male counterparts during the global financial crisis, by losing significantly less client capital); women tend to be less extreme or momentum (herd) in their views; have less active trading styles; more focused on fundamental research and tend to be more predictable in their investing behaviour over time.
In uncovering investment ideas, women are also able to relate to a wider set of trends in companies that are targeting women as customers, which ensures a wider universe of potential investment opportunities are considered.
A lack of women money managers is negative for clients, the industry and our country
Archary’s research concluded empathically that there is “no significant performance difference between female fund managers and male fund managers, so when employing new fund managers, companies should not consider gender as a deteriorating factor.
“The limited number of female managers and female managed funds in the democratic nation of South Africa should be a point of concern for government and labour."
“It possibly needs to be a career opportunity that is better promoted, to include it in career choices being made by the young population of South Africa. The inclusion of more females in the South African financial market could lead to increased stability during periods of economic crisis in particular.”
The working world of 2017 and beyond has no place for conscious bias to persist. Women can and do bring a necessary and complimentary skill set; personality characteristics and risk attitude to significantly enhance the available investment offering as money managers. For the required change to occur, three elements are needed:
- Clients need to become more engaged in the positive differences a diverse money manager base can offer and insist on this inclusion in the very same way diversification is sought out in asset classes; geographic exposure and sectoral exposure.
- More women need to join and stay in the industry – this will not only overcome and break down the self-fulfilling perceptions that have existed to date, but also expose a client base to the necessary diversity of thought so patently needed.
- Organisational cultural change is needed and leaders in asset management firms must lead by example, whether it be adopting a no-tolerance approach for non-inclusive practices, linking incentive bonuses of seniors to diversity and inclusion (both in hiring and promotion) and incorporating a range of flexible work arrangements to suit the modern-day investment professional.
Delphine Govender is chief investment officer at Perpetua Investment Managers.
This article originally appeared in the October 2017 edition of Collective Insight, which appears in the 19 October edition of finweek. Buy and download the magazine here.
