As per statistics from October 2023, the percentage of female fund managers has remained approximately 12% for over 20 years now. This seems like a massive gap considering women make up more than 50% of the world’s population, earn more than $20trn every year globally, and control over one-third of total household wealth. Despite the overall positive outlook in a post-Covid economy, the financial management sector still seems to be unable to overcome an age-old hurdle: gender bias.
All-men teams accounted for 70% of funds and nearly 60% of assets, while all-women teams represented less than 2% of teams and less than 1% of assets. These numbers are testimony to the fact that without structured plans to address this gap and the related implicit biases, the asset management industry will remain skewed toward men.
We need to get on the global bandwagon of inclusivity and make 2024 the year when women in the asset management field can address and decisively curb this disparity.
Challenges women face in the asset management industry
In the last decade, female-founded companies have increased their market share in the European markets from 2.5% in 2011 to 4.6% in 2021. In comparison, the market shares of companies having both male and female founders have gone up to 16.9% in 2021. Apparently, this might seem like the ladies are not doing a good job to make their presence felt, but that is far from the truth. In 2021, female-founded companies received only 2.2% of the total European Venture Capital (VC) investment, making it clear that the investors are deliberately trying to snub these companies.
These issues make it harder for women CEOs and asset managers to get access to capital, mentorship and guidance from investors in comparison to their male counterparts. Apart from this, women also tend to face challenges in accessing networking opportunities, especially in male-dominated environments, which in turn hinders their professional growth.
Companies led by men receive the bigger share of VC money, making it seem like they are the more lucrative, while those led by women are riskier from an investment perspective. Studies have time and again shown that women-led companies outperform male-led companies on metrics ranging from stock price momentum and returns, profitability increases, and employee satisfaction. In fact, VC-backed firms owned by women or predominantly managed by women have been found to sell or go public faster.
Opportunities that women can contribute to the industry
Credit Benchmark’s recent analysis suggests that women-led companies perform better in terms of credit risk, especially when there is widespread global economic turmoil. Let us take a look at what women have to offer for the betterment of the asset management industry.
Firstly, diversity in thought and perspective. Women bring diverse perspectives, skills, and approaches that can enhance overall organisational performance. Diversity drives innovation which is in turn translated to profitability.
Secondly, better client relationships. Let’s face it, women have always been considered to be the ‘softer’ gender, as if that is something to be ashamed of. However, these soft skills come in extremely handy while building and fostering long-term customer relationships. A recent Merrill report found that women investors feel 2.5 times more comfortable taking bigger risks when engaging with a female financial adviser.
All in all, accelerating change through ESG. Today’s investors and customers are aware of the environmental, social and governance (ESG) aspect of the companies they invest in. Women are ardent advocates of being responsible in their investing approach and that has been exhibited through their initiatives in driving major investments in ESG funds that captured $51.1bn of net new money from investors in 2020.
How can women shape the industry in 2024?
To improve the gender imbalance in the asset management industry, let us take a look at some of the solutions that can be implemented in 2024.
- Highlight diversity benefits to asset owners: Asset owners should be given the option to evaluate the benefits of having diversity in management and how it translates to profitable investments. A WTW report collated data from more than 1,500 investment strategies and found that investment teams in the top quartile of gender diversity outperformed the bottom quartile by 45 basis points yearly in terms of net excess returns.
- Inclusive hiring efforts and leadership training: To improve the gender gap in the asset management industry, women CEOs can curate programs that emphasise inclusive leadership skills. Actively hiring more qualified women in this sector will help create role models which will inspire younger female professionals to become a part of the asset management sector.
- Measured risk approach: Men have a higher trading activity and that can often result in overconfidence, leading to unnecessary risks and losses. Women have a more calculated approach toward risk, which means they will be conducting comprehensive research and prioritising long-term holding over seeking unpredictable speculative gains.
Embracing gender diversity isn’t just about equality; it’s imperative for building resilient and successful investment strategies, ensuring the industry thrives in a rapidly evolving global landscape.
