Hedge fund management still a man’s world even though women outperform
Are women better fund managers than men? If a recent report on their performance as hedge fund managers is anything to go by, the answer is yes, but, as ever, it is complicated.
The HFRX Women index showed that in the first seven months of this year female hedge fund managers delivered average returns of around 10 per cent, roughly double that of their male counterparts. This does not seem to be a flash in the pan because the HFRX index shows a pattern of outperformance by female managers over a longer period.
These findings are not surprising; indeed I wonder why the differences are not more profound because the fund management industry is so overwhelmingly male dominated, to the extent that only rather exceptional women manage to rise to the top.
It is hard to get precise figures for the number of women employed as fund managers, however some research by professors Boyson and Aggarwal, published in 2015, found that no more than one in 20 hedge fund managers were women and pointed out that in the US just 184 out of 7,000 mutual funds are run by women.
You could cast the net wider in the finance industry because female stockbrokers are a relative rarity and whole swathes of the industry have retained an extraordinarily high level of male domination.
It is interesting to note in parenthesis that Hong Kong, so far behind the rest of the world on many social issues, has long had a rather formidable band of female stockbrokers who were active in the market at a time when sightings of women in other stock exchanges inevitably meant you were looking at secretaries. Maybe this has something to do with traditional Chinese thinking that has long held that women are more adroit money managers than men.
There may well be something in this and it is reflected in another of those studies, this one from the University of California which looked at 35,000 high income households in the period 1991 to 1997 and found that when men were managing the domestic investment portfolios their returns were 1.4 per cent below those managed by women.
That’s a pretty modest difference but it tells us, at a very minimum, that women are at least as good at managing money as men – but why on earth should it be otherwise? By the way, one of the reasons that women seem able to secure better returns is because they are less likely than men to churn their investments.
Despite a proven ability managing investments the professional world of fund management men remains dominated by a cosy cartel, which used to be even more clannish than it is today. When, in the late 1970s, I started work as a cub investment reporter in London, the people I met were uniformly male, white and predominately public school types. In those days what were known as jobbers, lowly types who executed trades between brokers, included working class employees among their number but otherwise it was posh all the way.
Naturally those who enjoyed the benefits of this cosy state of affairs were resistant to seeing it disappear. They did not say so but the truth was that they feared having to compete on a level playing field because, hell, why do so if you don’t have to?
In many other once male dominated professions, such as banking and the law, barriers tumbled some time and ago and totally unsurprisingly it was discovered that gender was hardly the prime determinant of ability to do the job.
So why has the fund management industry been a holdout in this respect? There is no intrinsic reason, for example, why fund management should be more or less a women’s job than banking; many of the required skills are indeed rather similar. Moreover what a waste of resources if highly competent women are frozen out because of their gender.
What is different in fund management, but this is only a guess, is that while bankers, lawyers and the like operate among a wide customer base, fund managers are largely reliant on dealing with large institutions, such as pension funds and other financial bodies, where the most senior posts are still filled by men who, almost certainly would not admit it, but are more comfortable dealing with other men.
This makes it harder for women to secure top fund management jobs, a suspicion supported by another part of the Boyson and Aggarwal research, which shows that hedge funds run by women have higher rates of failure, not because of performance but due to the difficulty of raising capital.
Surely the time has come for the fund management industry to ease its way into the 21st century and strive for greater diversity at the top.
Stephen Vines runs companies in the food sector and moonlights as a journalist and broadcaster