Women Are Dominating in the World of Hedge Funds (and It’s Great for Everyone)
A new study shows that fund management is proving to be gender-biased, and women are, literally, giving men a run for their money in this male-dominant industry.
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Rothstein Kass, a leading assurance, tax, and advisory firm, released its third annual report, Women in Alternative Investments: A Marathon, Not a Sprint, which examined the performance of women in the alternative investment industry. The study surveyed roughly 440 senior-level women who were “fund managers, investors and service providers, as well as proprietary performance analysis of women-owned or managed private equity and hedge funds,” according to the firm’s press release.
For the second year in a row, the study found that “women continue to outperform their male counterparts,” despite the fact that men outnumber women in this industry. What’s more, the report points out that, “For the six and a half years ending June 2013, the Rothstein Kass Women in Alternative Investments (WAI) Hedge Fund Index returned 6 percent, while the S&P 500 gained 4.2 percent and the HFRX Global Hedge Fund Index dropped -1.1 percent during the same period.” Nice work, ladies.
The number of women-owned or –managed funds is expected to increase over the years, but not as quickly as women would like due to “lack of supply,” as the report outlines. In fact, more women are looking to launch their own funds in the coming years, 17.5 percent reported in 2013 versus 14.2 percent in 2012, which will stimulate the market and push towards greater diversity mandates that will be in the favor of funds owned and managed by women. To help support the prevalence of women in the alternative investments industry, the study showed that 73.5 percent of investors expect their allocations to remain the same in 2014, while 24.5 percent expect their contributions to increase “somewhat” and 2 percent to increase “significantly.”
No matter how underrepresented women may be in this sector, the numbers speak for themselves. Even after the financial crisis of 2008, women managed funds dropped just 9.6 percent, compared to 19 percent for funds managed by men. What’s the reason for women-owned or -managed funds performing better than others? According to Meredith Jones, director at Rothstein Kass and head of Rothstein Kass Institute, “Women simply perceive risk differently than men and tend to manage their portfolios accordingly. This results in less performance slippage, a diminished tendency to sell at the bottom, and a more consistent application of their strategies. Over time, these traits can create a meaningful and persistent performance differential.”
An increase in the number of women in the alternative investment industry only seems beneficial, seeing their track record over the past few years. However, gender disparities within the industry tend to steer women away from such careers and encourage a very male-dominant, and statistically lower performing market for institutional and large-scale investors. “At the end of the day, the combination of outperformance and diversification will drive allocations, fund launches and hiring within the alternative investment industry,” as the report concludes.
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