The Secret Chief Executive Officer (CEO) is an occasional column which recounts the personal experiences of a former CEO of asset management groups. These are their subjective views based on decades of experience.
A recent Citywire study – Alpha Female 2017 – has raised eyebrows and caused some navel gazing. Using Citywire's global database, it exposes the significant under-representation of women in the pool of fund managers. Specifically it finds that:
· Only one in 10 fund managers are women
· Women alone or women-only teams run only 4.5% of total global AUM in its database
· Women fund managers tend to operate in niche or smaller market sectors
A similar study by Morningstar, published in November 2016 – Fund Managers by Gender: The Global Landscape – found similar results. Looking across 56 countries, it noted that only one in five funds had a woman manager and that this has not had changed significantly over the previous 8 years.
It also noted that female representation in fund management was significantly lower than in other professions such as law or healthcare. Perhaps counterintuitively, both studies also noted that women representation was even lower in large financial centres.
Although these studies expose loudly what has been well-known to the casual observer for some time, there has been little research aimed at finding an explanation.
A panel of CEOs recently hosted by Citywire put forward the ‘laddish culture’ as one explanation. The Citywire article’s own headlines are provocative – ‘New Citywire research shows that women are not trusted to run funds…’ implying prejudice against women fund managers.
The OED defines laddish culture as ‘denoting or characteristic of a young man who behaves in a boisterously macho manner’. The term has come to be associated with young men adopting energetic and rude behaviour in social groups often involving drinking, aggression and sexism.
I have grown up in this industry man and boy, much of which spent as a fund manager, working in a variety of organisations, small and large, in businesses with offices across Europe and around the world. My experience is one where the gender mix of a fully integrated asset management business is very balanced but with certain gender imbalances in specific functions.
I believe that the composition of a global multi-asset, multi-product, multi-local manager where I spent 10 years is broadly reflective of the industry. Overall, the gender breakdown was 51% women, 49% men.
Women fund managers were indeed under-represented as they were in IT and front line sales. But women were over-represented in functions such as HR, marketing, sales support, performance analysis and legal, while in operations and research the mix was more balanced. In the HR department of this company’s London office, all bar one of the 15 or so staff were female.
Yet it is gender biases in the front office which capture the headlines and raise questions. Why? ‘Laddish culture’ headlines are magnetic and seem to fit with the (stereotypical) common perception of the City as one of excess and bad behaviour. It may also be attractive to diversity lobbies who are critical of gender imbalances which in their view demonstrate bias against women for the very top and most high profile roles.
My own experience acknowledges the under-representation of women in the portfolio management community, but struggles to recognise either a prejudice against women or a culture issue specifically in the front office.
Worryingly, such stereotyping may distract from the real cause for this imbalance and therefore its solution.
What I do recognise in managing portfolios is an environment which is highly competitive; where success and failure are visible in numbers published daily, weekly, monthly, and under constant scrutiny; and where success is well rewarded and failure very transparent.
It is therefore highly pressurised. Unsurprisingly this can lead to tension, frustration, anger, steam-venting and yelling at screens or down phone lines.
I have witnessed and partaken in all of the above. I cannot speak for investment banking and trading, but I would find it hard to say that this was the daily routine or even the universal reality of life in the asset management front office. More typical is a research, enquiring, analytical, collegiate and learning environment.
This is not an environment that is the preserve of a particular gender. And when it comes to those more stressful expressions of life in the front office, it is not my experience that women are shy-violets.
As for prejudice against women, I do not recognise this at all for a very good reason. Over the past three decades, fund management has become a meritocracy based on good numbers and good products– it is how we compete, it is how we grow and it is how we survive. Those of us in management positions have only one incentive – to pick the best fund managers irrespective of gender.
So what can explain the highly skewed gender distribution in funds management?
Could it be natural ability? James Damore of Google recently reminded us to resist the temptation to write controversial memos on long flights and post them on the company message board.
In just such a transgression, he postulated that the heavy male bias of Google’s engineering staff reflects fundamental differences between men and women and that gender gaps do not necessarily imply sexism. He was swiftly fired.
It is curious to me that we do not challenge the domination of women in the HR or marketing functions, presumably because we think that women have some natural qualities which lead to better performance or greater interest in these activities.
I am not aware of any research specifically answering the question whether women fund managers’ investment performance is better, worse or the same as their male counterparts. I have seen a study by Harvard Business School published in May 2017 which looked at whether women-owned asset managers performed better than men-owned firms and found no significant difference in performance. Until specific research says otherwise I cannot accept that natural ability can explain the gender bias.
If it is not natural ability, prejudice or culture, could it be due to a lack of interest in the activity? CEOs in the Citywire interview bemoaned the lack of applications from women.
This very much squares with my experience. It would be interesting to know whether applications for careers in fund management reflect the gender distribution observed in actual employment.
So why are women put off from applying? Could it be that women who feel they have the talent to succeed in this field are put off by the ‘perceived’ laddish or testosterone-charged culture; or are they conditioned to believe that it is difficult for women to succeed in funds management because they do not observe many successful women fund managers?
Both perceptions are in my view a misrepresentation of the reality and this ‘conditioning’ does a dis-service to the industry.
Savers deserve the best outcome irrespective of the gender, race, age, or religion of their fund manager. If talented women are not applying for fund management roles for whatever reason it is a loss to the industry and to the saver.
Putting the lack of representation down to ‘laddish culture’ or prejudice is not only inaccurate, it is likely to deter talented women from pursuing a career in funds management.
Instead, we should encourage and support efforts that dispel the stereotypical myths and stimulate greater diversity in fund management, such as, among others, the CFA Institute’s ‘Women in Investment Management Initiative’; Pimco’s sponsored panel on ‘Women in Investment Management’; M&G Investment’s ‘Women in Investment Management’ that makes the case for a career in funds management to female undergraduates; or conferences such as ‘The Women’s Investment Management Leadership Summit’, aimed at female leaders in the industry.
Not as part of a politically correct diversity agenda, but as a ‘yes you can’ response to conditioning to ensure that we do not miss out on talent that could improve customer outcomes.