Women make up about half of the world’s workforce, but are far from parity in the worlds of venture capital, hedge funds, private equity and other Wall Street investing firms.
There are a lot of reasons for that: a thin pipeline of candidates, biases, and lack of recruitment among them. What’s certain is that it’s not due to less aptitude for investing — some studies even show that female hedge fund managers outperform their male counterparts.
A new survey of 791 industry professionals released by KPMG outlines where progress is being made, and what needs to happen to close the gender gap.
First, some background. Here’s KPMG:
- Women make up only 15% of hedge fund CEOs, 11% of private equity and venture capital CEOs, and 14% of real estate CEOs. For chief investment officers, those figures are 18%, 19% and 26% respectively.
- 79% of respondents, who were nearly all women, say it is more difficult for women fund managers to succeed in the industry than men. The overwhelming majority also said it’s harder for women-owned or -managed funds to raise money.
- 44% said women are hindered by the stereotype that they are more committed to their personal lives/family than their work.
- 36% said women have less access to investor networks.
- 28% said women get less PR/visibility than men’s funds.
- 29% of respondents said there’s “weaker interest” in women owned/managed funds.
“In alternatives, there are certain prototypical models of a fund manager: people with certain pedigrees and characteristics, physical and otherwise,” PAAMCO’s CEO Jane Buchan said in the KPMG report. “When someone conforms to that model, there’s confirmation bias. However, if a fund manager is off-model — if, for example, they are a woman — as the research shows, they need to perform substantially better to get capital.”
Indeed, some research shows that women managers outperform men but don’t raise nearly as much money.
Here’s KPMG on a 2016 study by Rajesh Aggarwal and Nicole Boyson of Northeastern University’s D’Amore-McKim School of Business. The research looked at performance of nearly 9,520 hedge funds from 1994 to 2013.
“The sixty-two surviving female run funds in the study had better returns and similar risk measures than their male-run peers (of which there were 1,669), but lagged male counterparts in several significant ways: the female funds had significantly less AUM ($150 million versus $222 million for male-run funds), lower management and incentive fees but longer tenure than their male-managed counterparts.”
“Our data suggested no inherent differences in skills between male and female-run funds, but, in order to survive, women-run funds have to be better,” Aggarwal, the study’s co-author, told KPMG. “And even when they survive they don’t have the same [assets under management].”
So how does one fix the gap? Defining the problem is half the battle. One issue is that female fund managers often say they have trouble raising money from investors, while investors say they have trouble finding women managers.
“That’s the dichotomy of both sides of the coin,” KPMG audit partner Kelly Rau, who helped organise the report, told Business Insider.
About six out of the ten investor respondents said they thought there was a lack of supply in women-run funds.
One of the issues is size. Women tend to run funds that manage less money, which means they have less resources for infrastructure which bigger investors require if they were to invest. About one in five investors cited that as a top barrier to invest in women.
“Women are saying it’s harder for us to raise assets, but we’re here, we’re here,” Rau said. “And the investors are saying they don’t think there are enough women to invests assets in.”
The report highlighted some areas of optimism, however. Ten per cent investor respondents now have specific mandates for women-owned/-managed funds, which KPMG called a “significant improvement” since their 2013 survey, in only two per cent of investor respondents did.
“It’s very encouraging,” Kate Mitchell, co-founder of Scale Venture Partners, told KPMG. “We are no longer making the business case about why diversity is important — we are now talking about what we can do to change our numbers.”
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