Why top-performing women fund managers have the edge
Is your money in a fund managed by a woman? Chances are that the answer is no, since fewer than one in 10 funds available to investors in the UK is run by a woman fund manager. And that should be cause for regret – recent rplan research revealed that women fund managers are punching well above their weight.
rplan looked at the performance of UK funds going back over the past five years and found that while women fund managers were in charge at just 9 per cent of them, they were responsible for a disproportionate 18 per cent of the top performers. In other words, women fund managers were twice as likely to be found running top-performing funds as you’d expect, all other things being equal.
Why might that be - is it a statistical quirk or are women fund managers more likely to have skills and attributes that are well-suited to the job of looking after investors’ money? If the latter, it might make sense for investors to explicitly seek out funds run by women managers.
Helena Morrissey, chair of the Investment Association, is one who believes investors are missing out because there aren’t enough women fund managers. Launching the Diversity Project this year, an initiative aimed at ensuring the savings and investment industry recruits from a wider pool of talent, Morrissey warned: “It’s time to seek diversity in its broadest sense to ensure the industry has the cognitive and experiential diversity needed to be modern, to represent society and to make effective decisions.”
In fact, there is a fair amount of academic research suggesting that women fund managers have a propensity to outperform in certain circumstances. For example, a US study published in 2013, found that when it comes to value investment – a style where fund managers look for companies undervalued by the market – women have tended to “significantly outperform”.
A similar phenomenon is observable elsewhere in commerce. For example, Credit Suisse research has identified that the average return on equity of companies with at least one woman on the board is four percentage points ahead of the returns generated by those with no female directors.
One possible explanation put forward for these findings is that women tend to be less prone to “group think” – that is, simply accepting the consensus view about how to solve a problem or make a decision. Another much-raised idea is that women tend to avoid excessive risk taking – Christine Lagarde, the International Monetary Fund boss, famously observed that the financial crisis might have turned out very differently had Lehman Sisters been at the root of it, rather than Lehman Brothers. Some also argue that women managers tend to be more collaborative – and that this is ever-more important in a complex world where teams with different skills and competencies will do better than any one single individual.
In the end, making generalisations isn’t going to prove particularly helpful – anyway, there are good male fund managers out there too. But rplan’s research – and the considerable body of academic study it follows – is food for thought. The gender of your fund manager might just be another factor to add to your list of considerations when choosing an investment.