Where are all the female fund managers?

In a week where we’ve celebrated International Women’s Day, it’s worth asking – yet again – where are all the women fund managers? Across the collective fund industry as a whole in the UK, just 6 per cent of the cash under management is currently looked after by women according to the analyst Citywire. A study of 1,400 managers it conducted last year found just 67 women in charge of funds – many of them were doing the job as co-managers alongside men, rather than alone.

The UK is hardly alone in this regard. Of £11 trillion in money under management in funds around the world, more than £8 in every £10 is run by men.

The investment companies sector can point to some progress. Analysis published last year by the broker Canaccord Genuity found women accounted for 19.1 per cent of directors on investment company boards; that was almost double the 10.2 per cent figure recorded in 2012 (and may have increased further over the past 12 months). One of those directors, Rachel Beagles, now chairs the Association of Investment Companies itself.

Still, one in five is hardly a ratio about which we can be particularly proud. And the sector is still disappointingly short of female fund managers. There are some excellent example of high-profile women running flagship funds – though sadly, one of them, Baillie Gifford’s Sarah Whitley is just about to retire – but they are the exception, rather than the norm.

Why does this matter so much? Well, greater equality is an end itself of course, but for advisers and investors focusing on returns, the other significant argument here is that women so often make better investors than their male counterparts.

If that sounds like a wild generalisation, consider the evidence. The investment platform Hargreaves Lansdown has just completed an analysis of the performance of thousands of its clients over three years to August 2017. It found its female clients had outperformed the men by an average of 0.81 per cent; a small margin, you might say, but over 30 years this difference would result in the women-run portfolios delivering 25 per cent more.

Nor is this outperformance limited to the amateurs. Countless academic studies have found similar gaps between the average returns generated by professional male and female fund managers. One recent study, published by the consultant Rothstein Kass, found women in the hedge fund sector delivered average annualised performance of around 9 per cent over the past five years, compared to 3 per cent from the male-dominated hedge fund industry itself.

In the 1990s, a ground-breaking research project at the University of California spent some time looking for explanations of this phenomenon. Its chief finding was that men tended to be more confident in their own abilities than women and therefore tended to trade far more often; in the process, they racked up high dealing changes and, since their confidence was often misplaced, regularly mis-timed the market. Sound familiar?

The research on the importance of having women on the board, pertinent to the investment companies sector specifically, is also compelling. One study from Credit Suisse found 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.

What lessons should we draw here? Well, one is that we need more women in charge of our investment funds – more women on the boards of investment companies and more women running the money. In the meantime, though, another learning is that advisers and investors might be wise to add another criterion to their selection process when choosing funds: look for a high degree of female management to give yourself a better chance of stronger returns.