Gender equality – or lack thereof – in the asset management industry is neither new nor a matter of speculation. According to a March 2019 article headlined “When Will We See More Gender Equality in Investing?” in the Harvard Business Review, the 4% share of women at the top of the pyramid in investment management may be the lowest of any major business sector or professional discipline, with women controlling only 1%-3.5% of assets under management.
Those figures are drawn from a January 2019 report from the John S. and James L. Knight Foundation and Bella Private Markets, which concluded that “diverse funds often have top-quartile returns, with 26% of women-owned and 29% of minority-owned funds in the top quartile, on average”.
Which begs the question of why asset management firms are not rushing to embrace diversity.
Gender equality is also the fifth of the 17 sustainable development goals set by the United Nations in 2015 and targeted to be achieved by 2030. “Gender equality is not only a fundamental human right, but a necessary foundation for a peaceful, prosperous and sustainable world,” it states. Sub-clause 5.5 seeks to ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic and public life.
Asset management firms that have pledged to support and implement the goals have the obligation to deliver on their commitments. The industry has plenty of cause to catch up, on grounds of self-consistency as well as performance.
Asset management and inclusion
There are plenty of data to show that the current picture on parity, opportunity and other benchmarks for women in the asset management industry is not an ideal one. Winnie Kwan, equity portfolio manager of Capital Group, cites a recent Financial Times survey of 42 top global asset management groups, where 45% of respondents rated their industry as “still relatively poor” in gender diversity, while one-third rated it as average.
And Jayne Bok, head of investments, Asia for Willis Towers Watson, points to a CFA Institute figure indicating that while women account for about 30% of CFA candidates and 20% of CFA charter holders, they only hold about one-tenth of the senior roles.
As this implies, female representation can be more than just a matter of headcount. Louise Kavanagh, managing director of Nuveen Real Estate, says research shows that women run just 3% of US mutual funds as they are more likely to become accountants, doctors or lawyers than fund managers.
Furthermore, she adds, most senior executive roles held by women tend to be in departments such as human resources, marketing or general counsel, whereas chief executives of asset management firms are usually appointed from chief operating officers or chief financial officers, or senior positions in fund management and investment.
But there are some signs of progress. Jessica Jones, head of the retail client business for Asia Pacific ex-Japan at Goldman Sachs Asset Management, says that over half of the relationship managers at some of the largest distributors in the region serving the Greater China area are women.
According to Meaghan Victor, managing director and head of SPDR ETFs for Australia and Singapore at State Street Global Advisors, there are now more opportunities for, and acceptance of, female executives in asset management. Also, “strong internal leadership from women in direct managerial or leading positions, in our organisations in particular, are far more apparent in the industry now”, she adds.
At Capital Group, Ms. Kwan says over 45% of analysts who joined the company’s investment group in 2018 were women, up from 30% a few years ago.
However, although “standalone gender equity strategies and policies are useful for companies to reform their approaches”, Ms. Kavanaugh says “embedded practices in an industry or a business are key to outcomes, such as building a case for change, role models and encouraging partners to drive change”.
Ms. Victor hails the fact that the appointment of women to important roles today is met with welcome congratulations on their merit, rather than surprise and questions. But she says pro-active focus on gender diversity should not lead to situations where women appointed to a role feel it’s due to a need to meet a quota rather than on merit.
The benefits of breadth
If the asset management industry is to commit itself to greater diversity, the onus is on proponents to demonstrate realisable benefits for firms. This could be in the form of compliance with the UN’s sustainable development goals, but more persuasively, in investment results and performance.
There are plenty of data to underscore this point. “In the US alone, women influence or make decisions over $11 trillion of wealth,” Ms. Jones says, citing a widely accepted figure.
Ms. Victor points to recent research linking the concept of ‘cognitive diversity’ to supporting better outcomes for businesses, in both the financial and cultural sense, as well as studies that indicate that more inclusive, gender-diverse boards result “in a more attentive attitude to risk management”.
Some of the most striking data for this come from private equity and venture capital. A March 2019 study by the International Finance Corporation, alternative investment firm RockCreek and investment consultant Oliver Wyman, found that funds where management teams were balanced in gender delivered returns that on average are 10%-20% higher than less balanced ones.
It’s not hard to imagine that the broader asset management industry could mirror this pattern, and that even lower outperformance figures would still be enough to influence funds to strive for balance.
Ms. Kavanagh cites McKinsey data from early 2018 showing that the share of companies in the top 25th percentile for gender diversity on their executive teams earning above-average profits had risen from 15% to 21% in the prior three years alone.
Ms. Bok points out that several studies have indicated that women bring a number of advantages to businesses, including higher growth and productivity, and different skills and perspectives, such as towards risk and collaboration.
However, industry practices – such as the typically lengthy working hours – may need to change in order to allow women to make their best contribution. Ms. Bok cites the example of a female chief investment officer at a major asset management firm, who started as a research analyst, then became a portfolio manager, and now manages the investment team. She says this CIO noted that portfolio management roles are 24/7 and those in the position are typically in their early to mid-30s. This means the position may conflict with the demands of building a family if nothing is done to offset the impact.
Gender equality at Asian firms
Asian firms and business culture have generally been regarded as lagging the West on adherence to standards on sustainability and diversity, though that too appears to be changing. According to Yen Leng Ong, country executive for Southeast Asia at Northern Trust, compared to 20 years ago, “particularly in Singapore, Shanghai and Hong Kong, we increasingly see influential women holding top positions in the asset management industry”. South Korea and Japan are also catching up.
In fact, Ms. Victor believes there are some areas in which Asian society actually facilitates female advancement in asset management. “Respect is very important and is something that feels like it is being lost within the hustle and bustle within Western society, in regards to respect for people’s knowledge, their experience or role within an organisation or society,” she says. “We do not often hear people referring to clients or acquaintances using their job role or title, or even as Mr or Mrs, in the Western hemisphere.”
Capital Group’s Ms. Kwan quotes a recent study on gender diversity from The Women’s Foundation (Hong Kong) and PricewaterhouseCoopers, which found that female participation in the financial industry and on corporate boards remains low compared to the West. Some 70% of respondents blamed lack of career progression as the main reason for retention problems in Asia.
There may be cultural nuances that make the picture less positive in certain regional markets. “There is still a wide gender range across Asia. Not all countries are the same,” Ms. Bok says. She cites the World Economic Forum’s Gender Gap Index showing that Southeast Asian countries have better gender participation than those in North Asia.
According to Ms. Jones, the asset management industry should dispel “any myths that exist about the advancement of women [while] ensuring it is appealing to women from all backgrounds and degree disciplines”.