Why we need more female fund managers
Several studies show that female fund managers often outperform their male counterparts.
For example, in one of its studies, Hedge Fund Research (HFR) found that women-led funds outperformed the market between January 2000 and May 2009 or the period between the dotcom crash and the Global Financial Crisis.
Meanwhile, in a study conducted by KPMG, it found that hedge funds run by female fund managers generated higher returns compared to the average return of hedge funds across all strategies from 2007 to 2015.
Finally, according to a recent study conducted by Goldman Sachs, 48 percent of female-managed hedge funds beat the market between the pandemic low in March 2020 up to August of the same year. In contrast, only 37 percent of male-led funds outperformed the market during the same period.
Reasons why female-managed funds perform better are not clear. However, one possible explanation is the high level of skills required for women to work in the industry.
Fund management is a male-dominated industry, with men accounting for around 90 percent of all fund managers based on some estimates. As such, to successfully build a career as a fund manager, a woman must stand out from all her peers, including her male counterparts.
Another possible reason for women’s outperformance is the way they make decisions. Women try to gather as much information as they can. They also seek the opinion of others, even if others have diverging viewpoints.
Although women’s thoroughness may cause delays in the decision-making process, their focus to details allows them to make better informed decisions, leading to better results.
Finally, women tend to be more cautious than men. Because of this, women fund managers are less likely to suffer from overconfidence, which is an undesirable trait for fund managers. They are also more adherent to risk management rules, minimizing the size of potential loss. Although these qualities may limit female-led funds’ potential returns, they also prevent funds from suffering significant losses, which often leads to outperformance.
Because of women’s favorable track record in managing funds, more should be done to encourage females to pursue a career in the industry.
One way is to increase women’s awareness of careers in fund management. Highlighting successful women who work in the industry could inspire younger women to pursue a similar career path.
Employers can also help women succeed in their own companies by giving them equal opportunity in terms of training and promotion, and more flexibility so that they can continue to work despite growing responsibilities at home.
Finally, increasing the public’s awareness regarding female-led funds’ outperformance should also lead to better opportunities, encouraging more women to work in the industry.
One of the major challenges of female-led funds is the ability to raise capital. This should change once people become aware of female-led funds’ outperformance, improving their marketability.
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