Is there a gender representation issue in financial services and investment management teams?
1.1 Frontier Line - The Power of Gender Diversity in the Workplace. The investment industry experience (2018)
This piece by Frontier Advisors considers public domain research information about the status of gender diversity globally, the commercial benefits of gender diversity and includes the results of Frontier Advisor’s own study of Australian and global equity managers.
Gender Diversity Research referred to in the report
Statistics regarding gender imbalance
• A McKinsey study of women in the workplace in the UK found that women are most under-represented in the banking and finance sector;
• A study of US fund managers found that only 9.4% were managed by women.
Economic benefits of diversity
• A PWC study showed that achieving economic gender parity could increase GDP in Australia by 11%
• Various studies have proven that there is a clear link between diversity and business performance, including bottom-line profit margins.
Reasons for the benefit
• Several research papers find positive links between gender diversity and collective problem solving.
• Diversity also increases creativity and innovation, as attitudes and beliefs tend to vary with demographic variables.
• Diversity is far more than a question of fairness; it is about reducing the risk of group think.
What is being done about it
• Frontier have introduced questions about gender diversity of investment teams to their manager due diligence process
• Some Australian super funds are focusing on gender diversity of their third party managers or inhouse investment teams
• Super funds are also using active ownership as a tool for engaging companies to bring about change
Frontier Advisor’s own study
In a 2017 survey, Frontier Advisors received responses from 84 Australian and global equity managers focusing on questions relating to investment teams. Questions ranged from the gender of investment team members as well as age, educational background and languages spoken.
1.2 Global research – Oliver Wyman Women in Financial Services 2016
This report by Oliver Wyman outlines the findings of their extensive study of 381 financial services institutions in 32 countries looking at gender balance. The report suggests that in order to move financial services firms towards gender balance a mix of bolder structural solutions and more profound underlying cultural change will be required.
Whilst female representation is growing on financial services boards and executive committees the report notes that progress is slow. Female representation on executive committees is growing much slower than on boards, in spite of the significant effort and investment in attracting more women into financial services and developing more of them into leaders.
1.3 CFA Institute (2016) Gender Diversity in Investment Management – New Research for Practitioners on How to Close the Gender Gap
To uncover some of the underlying causes of gender disparity in investment management, the CFA Institute developed a survey in conjunction with a number of finance scholars. Over 5,000 CFA members responded to the survey (more than 4,000 men and more than 1,000 women) and the survey data was then analysed and compared with several additional datasets to investigate the question of why women are underrepresented in investment management.
The findings were clear - women are underrepresented in the investment profession representing only 1 in 10 people in the key leadership positions of CEO, CIO and CFO. Furthermore, female CFA members represent:
- 10.2% of Chief Investment Officers
- 13.9% of Traders
- 14.9% of Portfolio Managers1
The report has a number of useful suggestions as to how the investment industry can attract and retain female professionals including: heightened promotion of investing as a career at university level, making potential entrants to investment management aware of the flexibility available in the industry and education of investment firms on the importance of work structure and flexibility in attracting a gender diverse workforce. The report also highlighted that more attention and research are needed to explore how diversity can contribute positively to certain types of investment decisions. With the complex problems faced in investment situations, groups can get stuck if they have limited diversity where everyone thinks in the same way. The report explains that such difficulties are far less likely if the diversity is deep and derived from wider sources of knowledge, perspectives, experience, values and ways of thinking.
1.4 Morningstar research report (2015) Fund Managers by Gender
Morningstar analysed its US open end mutual fund manager database in 2015 and found;
- less than 10% of US fund managers are women;
- women exclusively manage 2% of the industry’s assets compared with men who exclusively manage 74% of the industry’s assets; and
- mixed gender teams account for the remainder.
1 Ibid, page 8.