Women of The Street
Meredith A. Jones author of Women of The Street writes for us about the missing women of finance. She also wrote a piece recently for The World Economic Forum on how the lack of women on Wall Street negatively impacts investment returns, volatility, and jobs.
The Missing Women of Finance
There is a mounting body of research that suggests gender diversity is good for business. From female founders to board members, and from women investors to CEOs, it is becoming increasingly undeniable that gender diversity boosts profits, investment returns and the economy. In fact:
•Catalyst found that, “on average, companies with the highest percentage of women board directors outperformed those with the least by 53 percent.“
•First Round Capital found that, across 300 of their portfolio investments, companies with at least one woman founder performed 63 percent better (as measured by valuation) than all male teams.
•From 1997 to 2012 (the most recent period for which there are numbers), the National Women’s Business Council reports that women-run firms have continuously created jobs, 510,939 positions to be exact, and increased the number of employees by 19.5%, compared with 11.5% for male-owned firms.
No matter where you look, there is strong evidence that women contribute to the bottom line. And yet, women remain woefully underrepresented in business generally, and in investing specifically. In fact, while women have made tremendous strides in medicine and law, the number of women in the investment arena has remained relatively steady, and in some areas has actually declined over the past 20 years.
Even today, when challenged, most people are hard-pressed to name a single female investor, while names like Warren Buffett, George Soros, Julian Robertson and others spring quickly to mind.
Indeed, the number of women in the financial industry has been and remains remarkably low. According to a recent Morningstar report, women manage less than 2% of mutual fund assets, and Social & Capital Partnership reports that nearly two-thirds of the top 71 Silicon Valley venture capital funds have no senior female investment professionals. Within hedge funds, my research has shown a roughly an 80:1 male to female ratio. In fact, there are 11 male hedge fund managers named John, James, William or Robert for every one female hedge fund manager of any name. In the largest private equity firms, there are 6 men named John, James, William or Robert and zero female private equity leaders. Even in more mainstream financial roles, like Registered Investment Advisors and Certified Financial Planners, the numbers are still abysmal. Less than 30% of RIAs and less than 23% of CFPs are women.
But the fact remains that, in investing, as in most areas of business, more women mean more money.
•My 2012 & 2013 research for the Rothstein Kass Institute showed that women-run hedge funds outperformed the hedge universe at large by a margin of six percentage points over six-and-a-half years.
•Although a June 2015 Morningstar study was less conclusive, it did reveal a slight edge for mixed gender teams, and research from TD Direct showed that 5 of the top 25 performing mutual funds over the last 10 years were run by women, despite underrepresentation in the sample.
•And the gains aren’t relegated to only professional investors. Recently SigFig, a portfolio platform for individual investors, examined 750,000 portfolios and found that female investors outperformed men by 12% in 2014.
Studies show that there are a number of biological, cognitive and behavioral factors that give women a business and investing edge. From less overconfidence, overtrading, and testosterone to a greater tolerance for market noise and more consistent application of investment strategy, there are a number reasons why women approach investing in a unique way. Women create both cognitive and behavioral "alpha" with their investment style, which contributes over the long run to outsized investment returns and increased portfolio diversification.
Meredith A. Jones is best known for creating industry-leading hedge fund research. She has presented her original research and insights to industry participants around the world and has had her findings published in books, journals, industry publications, and international major media outlets, including the Economist, the New York Times, CNBC, the Wall Street Journal, the Financial Times, the Journal of Investing, and others.
Women of the Street: Why Female Money Managers Generate Higher Returns (And How You Can Too) explores the many reasons why increasing the number of women on “The Street” can be beneficial for institutional and individual investors. It also provides a lens into the profitable investment strategies and fascinating lives of 11 top female money managers. At the end, you’ll understand why and how to “invest like a girl.”