Can closing the gender gap stop eroding returns?

A report from Morningstar shows low female representation in the Canadian fund industry

Can closing the gender gap stop eroding returns?

Canada’s female fund managers are hugely outnumbered by their male counterparts compared to other professions – and even to mutual funds around the world, according to new research from Morningstar. The survey found that about 90% of Canadian funds are run exclusively by men, even higher than the proportion documented eight years ago, according to the Globe and Mail.

While the report did not include an examination of performance by gender, it did cite a tendency among men to trade more often, which can dampen returns. “In periods of downturn, women are more likely to hold on to their investments, indicating higher conviction,” wrote Morningstar quantitative analyst Madison Sargis. “In periods of success, on average, women also are less likely to be looking for quick wins.”

The study covers more than 26,000 fund managers in 56 countries; from this census, Morningstar found that roughly 20% of funds around the world have at least one female manager – a number that has not changed since the financial crisis eight years ago.

The gap is most evident in large financial centers like the US and Germany, where fund management firms posted female participation rates of 10% and 9%, respectively. In other professions, the disparity is smaller: nearly 40% of Canadian lawyers are women, whereas females represent just 11% of fund managers.

Bank of Montreal’s Women in Leadership Fund, which invests in companies that have a female CEO or a board with at least 25% female representation, is run exclusively by male portfolio managers. Mckenzie Box, a product manager at BMO Global Asset Management, said that the fund’s management team was chosen based on fit, its mandate notwithstanding.

When women are brought in to manage a fund, they tend to be part of a team, get assigned to passive funds, and not given responsibility over multiple funds – despite having more credentials on average than male counterparts. Whether women choose to be team members or are simply taking what they can get is unclear.
Sionna Investment Managers President Kim Shannon believes that women might be content with just being contributors. On the other hand, she also surmised that being part of a successful team doesn’t look so impressive on a resume, which along with family demands may explain high attrition levels among females in the industry. Her firm goes against the grain: three-quarters of the executive team, nearly half of the investment management team, and three of the most senior portfolio managers are women.

“I suspect women invest less with their egos,” she said. “When you can set your ego aside, you can make more rational decisions, and you’re likely to make more money.”

Related stories:
SRI offers advantages for advisors
What factors cause female advisors to leave?