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Slow, but encouraging, progress for women in alternative funds industry Back
Darina Barrett looks at a recent study on women in the alternative investment industry which shows that interest in women-led funds is growing but there is still a long way to go in developing women leadership roles in the industry.
Gender diversity and gender related business analysis have been a hot topic in recent times. The latest “Women in Alternative Investments” report prepared by Rothstein Kass prior to the firm’s acquisition by KPMG, found that there is definitely a perception that being a woman in the alternative investment industry is not an easy path. While the report doesn’t provide any specific Irish market data, it is an informative update on the attitudes and position of senior women in the investment management companies who buy the services offered by the Irish funds industry.
Darina Barrett

The good news is that there are signs of increased interest in women-owned and managed alternative investment funds. However, despite the progress that has been made, it seems most believe there is still quite a long way to go in developing women’s leadership roles in the alternative investment industry.

The report sets out the findings of a survey which captured the sentiments of 440 senior women in the alternative investment industry, predominantly in the US, including fund managers, investors and service providers. The survey looked at women’s participation in leadership roles in the industry and investor attitudes to women-led investment vehicles and the returns generated by female managers.

Women led funds - a track record of strong performance
For many of the survey respondents, performance rather than affirmative investing is the key to increasing assets under management in women-led funds. For the six and a half years ended June 2013, the Rothstein Kass Women in Alternative Investments (WAI) Hedge Fund Index returned 6 %, while the S&P 500 gained 4.2% and the HFRX Global Hedge Fund Index dropped -1.1% during the same period.

For investors who want to increase their allocations to women-owned or -managed funds driven by diversity mandates and demonstrated outperformance by female managers, supply is an issue. A recent Bestinvest report in the UK found that only 7% of Unit Trusts or OEICs are managed or co-managed by women. Until there is more money flowing to women-owned and managed funds, it’s hard to envisage a stream of new fund launches for female led vehicles.

Where are the women?
Over 70% of the women surveyed had over 11 years experience in the financial services industry. Women remain more common in financial, compliance or operations roles within the alternative investment industry and are least likely to hold C-level technology positions within their firms.

Women were most likely to be found in the CEO position at hedge funds (23.2 %) or investor firms (17.5 %) and were least likely to hold the CEO position at venture capital respondent firms (9.7 %). Young funds across the fund groups were more likely to have a woman at the investing helm than established funds. The percentage of women comprising the majority of a firm’s investment committee continues to remain somewhat stagnant, with just under 10% of firms reporting that women represent 50 % or more of their investment committees, with private equity funds remaining further behind that number.

‘Women simply perceive risk differently than men and tend to manage their portfolios accordingly,’ according to one of the authors of the report. ‘This results in less performance slippage, a diminished tendency to sell at the bottom, and a more consistent application of their strategies.’

Striving for success in a man’s world?
In prior years, the female respondents indicated that their gender made it harder for them to succeed in the alternative investment industry. This year, the percentage dropped slightly to 61.3 %, although the comments of the women polled continue to exhibit what appears to be long-standing frustration that the industry is still “run like a country club at best, locker room at worst”.
Certainly sitting across from investment managers in board rooms in New York and London, you encounter an increased number of women at the table but it is still rare for them to be leading the conversation as the most senior member of the investment manager’s team.

Service providers rather than investment managers make up the majority of the participants in the local Irish alternative industry. While there is no local equivalent to the US data noted above, the Irish funds sector is notable for having a number of women heading up Irish and European operations. Anecdotally it can be seen that women have risen to the top in a number of service provider organisations and hold leadership positions in the investment management practices of legal and accounting firms here in Ireland. This is consistent with the report’s findings that women are more likely to get to the top in operational and compliance roles in the alternative industry than rise to the top in investment management and run their own fund.

Investor respondents seem to be more optimistic about an increase in the female ranks, with nearly 60% agreeing that there will be more women in the alternative investment industry in 2014 and beyond, and over 40% believing that there will be more women-owned and -managed fund launches from 2014 onwards. As their sentiment and money tends to encourage or discourage fund launches and hiring practices, they may be the most prophetic of the respondent groups.

Momentum behind women running alternative funds is building at a slow rate that some find frustrating. Improvement will continue to be driven by investor demand for more diversity within their portfolios.

In the meantime, there is a growing body of research that shows women portfolio managers tend to outperform. As a result, if diversity doesn’t drive investors to seek women-owned and managed funds, performance track record will lead them there. The gender profile of the decision makers and risk takers in the alternative investment industry is changing slowly but it is a development worth watching.
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