Women make up only a small slice of the portfolio management business, but a recent study shows that the top performers surveyed beat their benchmarks most of the time.
The study by Investment Metrics, a data analytics firm in Norwalk, Connecticut, covered 353 portfolios across 176 firms over a 10-year period. The top-performing managers beat their benchmark indexes and did so in at least seven of the 10 years studied.
Despite that success, however, women are woefully underrepresented in portfolio management. Of the portfolios surveyed, 50 had a woman in the lead or co-lead management position – 14%.
In the U.S. overall, about 11% of fund managers were female as of Dec. 31, 2020, according to Morningstar, a percentage that has remained more or less constant over the past 10 years.
The question is how to improve those statistics. But the study ends on an optimistic note, suggesting that as more companies adopt diversity and inclusion strategies, they will drive more assets toward women-led investment portfolios and representation will grow.
In fact, said Cady Ridall, a research consultant for the firm, 33% of the asset managers reviewed had a D&I initiative published on their websites.
Investment Metrics found that non-U.S. large-cap equity had the greatest representation of female portfolio managers at 17%. The other strategies showed similar percentages, and the results were little changed from a study last year, according to Scott Treacy, also a research consultant.
“With more D&I, more women are going to be given research analyst roles that lead to portfolio management,” he said. “There are good offerings for institutional investors to choose from.”
Treacy said institutional investors could be critical to getting more women into the business if they drive a substantial amount of assets toward quality, women-led investment portfolios. Asset management firms tend to respond quickly when institutional investors, which control huge amounts of money, start directing it toward particular strategies.
“If investors like CalPERS (California Public Employees’ Retirement System) and CalSTRS (California State Teachers’ Retirement System) look for D&I,” said Treacy, that will do much to lead to a more diverse business.
“Diverse opinions lead to better outcomes, and ultimately it all comes down to the money they will make,” he said.
Marypat Smucker, a principal at Parallelle Finance in Seattle, a research advocacy group that handles data on what it calls “gender lens” investing, said there is a wide body of research showing that diverse leadership — and specifically gender diverse leadership — outperforms.
Parallelle follows mutual funds that invest in companies with more women in leadership roles.
“It leads to less fraud, better risk management, better financial performance and better operations performance,” she said.
The data on women in portfolio management has been “very sticky for decades at about 11, 12, 14%,” Smucker said.
“Growth is just painfully slow, but what moves the dial is pressure, shareholder pressure, investor attention to diversity, equity and inclusion,” she said.
There has been progress, she said, when it comes to women on corporate boards, with women holding about 30% of the corporate board seats in companies in the S&P 500.
“Everyone must understand the business case,” she said. “Diverse portfolio management teams outperform.”
Leslie Thompson is a member of the select group of female portfolio managers. She has been in the business for 25 years, having co-founded Spectrum Wealth Management in Indianapolis, with $1 billion in assets under management.
Her mentor was her father, an investor who had his own firm. She never worked for him but said she always knew she wanted to be in the business. But it seems, she said, others do not want to follow.
“When you look at the industry as a whole, whether portfolio managers or CIO-type roles, we are just getting no female resumes whatsoever and are trying to figure out why,” Thompson said .
The issue, she said, is getting young women and girls exposure to the business.
“Everyone talks about STEM (science, technology, engineering and mathematics) but usually the focus there is on technology and engineering,” she said. “Very few women coming out of college are wanting to do this.”
She said the rise of passive investment strategies may have something to do with it, that there may not be as much need for active managers.
But at the end of the day, she said, there’s just a lack of exposure of young women to the business, and she said that needs to be fixed.
“You just have to ignore the noise, push through it,” Thompson said. “When I go to investment meetings, sometimes I’m the only woman there. But you just have to be persistent, go and exert your voice. There may be a lot of people who don’t look like you in the room, but just press on.”
