There is growing recognition that female portfolio managers are not only able to outperform their male counterparts, but also attract wealthy women clients. Yet major barriers remain for women in finance.
In the run-up to International Women’s Day, the investment sector has been closely examining how performance of female portfolio managers matches the needs of female entrepreneurs and wealth management clients.
Among Europe’s top performers highlighted by data analysts Morningstar, Marie-Ann Allier of Paris-based investment house Carmignac has been praised for “bargain-hunting” at the height of the Covid-driven sell-off, which propelled her fund to an “impressive rebound” in the second half of 2020 and 2021.
In Asia, Louisa Lo, who manages Chinese and emerging Asia funds out of Hong Kong for Schroders, has posted an annualised 9 per cent return over the last 15 years, surpassing the MSCI Golden Dragon Index category benchmark's 8.4 per cent and outperforming 70 per cent of peers in the Greater China equity Morningstar category.
There is a growing belief that this small but rising cohort of women managers are not only performing better than male counterparts, but also able to attract the burgeoning contingent of wealthy women clients.
While women are not necessarily risk averse, they are often more calculated risk-takers. “Male investors tend to be overconfident in making financial decisions,” states Ylva Baeckström, senior lecturer in finance at Kings Business School, and a former senior private banker. Female clients, she says, are more likely to invest greater amounts of family assets with a woman portfolio manager, because their attitude to risk and safety is shared.
In her research, Dr Baeckström found this difference to be economically crucial for wealth management firms, with wealthy women investing 11 per cent more if their portfolio adviser is female rather than male.
Barriers to entry
The industry has a poor record regarding inclusion and representation. Generally, the world of finance was built by men for men. It was not until the 1970s that women were allowed to be members of the stock exchange in London or able to apply for credit cards in the US in their own names.
Despite countless new laws and regulations, major barriers remain, says Dr Baeckström. “Women in finance are 24 per cent less likely to be promoted than men, they earn less, and they know they earn less — and that eats away at you,” she says.
When women invest, they tend to do better than men. However, according to the 2017 Fidelity survey, only 9 per cent of women believed they could outperform their male counterparts.
But women also suffer from major misconceptions about asset and wealth management, which can hinder their career progress. “Many women are intimated by wealth management and financial services in general,” fearing it is a mathematically-driven quantitative discipline, says April Rudin, founder and chief executive officer at The Rudin Group. “But the truth is that much of private banking and wealth management in reality involves long-term planning and goals-based investing.”
The job of portfolio manager has shifted from using spreadsheets to deploying “wealth planning platforms”, and that is advantageous for women, according to Ms Rudin. “Women bring more ‘care of the client’ experience whereas men might be more focused on investment management only,” she says, adding that financial literacy must be built into school and higher education curriculums.
According to the Financial Literacy Around the World report, just 33 per cent of the world is financially literate. It is not just the poorest countries that typically exhibit lower levels of financial literacy; some major economies also struggle with low rates. For example, Japan and Italy have a financial literacy rate of only 40 per cent.
Women are marrying later or choosing not to; they are building households in a different way, and are much more career-focused, all trends which require greater financial literacy, says Shannon Saccocia, chief investment officer at Neuberger Berman Private Wealth.
“As a society in general, I don’t think we do a great job with financial literacy,” says Ms Saccocia. “Being independent and providing yourself stability definitely gives you a greater choice from a lifestyle perspective.”
Inclusion on all fronts
Gender equality is just the start of building wealth management groups which can better serve all segments of society, she says. “Our industry needs to become more diverse and younger to connect with the next generation,” says Ms Saccocia.
“For instance, 30 years ago, if you engaged with an adviser, you were looking for somebody who was much older, who had lived through a number of market cycles, or they were your father’s adviser.”
Younger generations, however, are different when it comes to which wealth firm they want to work with. “They are looking for people who can connect with them and resonate with their viewpoints,” she says. “I think this is necessary not just for women but for everyone. There needs to be more diversity. We need private wealth managers to look and feel more like their clients.”
It is also vital for wealth managers to study shifting demographic patterns. “I think the Western world has a reasonable amount of female savers, but in the emerging market world, that is still to happen,” says Victoria Harling, head of emerging market corporate debt at asset managers Ninety One. “As you get more financial inclusion for women, particularly in emerging markets, I think you’ll naturally find that gender balance equals out over time.”
Diversity and demographics — for investors in developing countries — must always be at the front of portfolio managers’ minds, she says. “You can’t invest in emerging markets and not resonate with all the cultural differences,” explains Ms Harling.
“I have a huge range of skills within the team, and that makes us interesting. We really lean on each other to get the best opinions and to drive those investment decisions forward.”
According to a report by UBS, women dedicate more time to researching information, are more inclined to adhere to a plan, and are less prone to attempting market timing. They also benefit from more diversified portfolios and are more confident with decisions when their investments have a positive impact on society.
