For financial professionals only
In 2020, Meera Hearnden was one of 23 women in Citywire’s Top 100 UK Wealth Managers. In 2021, she was one of 27. Here, she shares why she believes it’s vital for investors that the number of female investment and portfolio manager numbers continue to grow in 2022 and beyond.
Diversity and inclusion matters
As investment managers, our key objective is to ensure we’re delivering strong and consistent risk adjusted returns in line with client expectations. We carry out regular due diligence meetings on all our underlying funds – active and passive – and question fund managers on a variety of topics including performance, risk, positioning and ESG.
If we notice a fund manager’s team is made up predominantly of men, we ask them why. If they say diversity is important to them, we ask what they’re doing about it. We dig deep to identify how they deal with diversity in their underlying companies – for example how they’re engaging with company management around the number of women in senior positions.
It’s plain, simple, logical thinking
There’s a good reason why it’s important to have representation of women on investment teams. Citywire’s Alpha Female research reports that the returns generated by mixed investment teams are likely to be higher than those delivered by either male-only or female-only teams.
It shows that over five years, for every unit of risk taken, the following returns on average (1).
| Mixed | All female | All male |
|---|---|---|
| 4.24% | 3.55% | 3.47% |
Interestingly, the additional return generated by mixed gender teams is not achieved by taking greater risk. In fact, the research shows that over the past five years, mixed teams generated lower drawdowns and took less risk than male or female only teams.
There’s no hiding from this data; it’s clear that being inclusive and having well represented portfolio managers and analyst teams go on to deliver better risk adjusted returns. That’s why we are committed to asking fund managers how their teams are represented and engaging with them to make improvements where possible. It allows for the best possible outcomes.
The same is true when fund managers quiz their underlying companies on the gender and background of their management teams. Research shows that the broad presence of women at a senior level where key decisions are made can lead to higher profitability (2).
This is likely because women bring a diverse skill set to a business and can help promote less discriminatory attitudes. Having favourable work policies such as parental leave will allow women to return to work sooner after having children and provide more opportunities to climb the corporate ladder. Firms that deliver higher profitability are likely to see improved share price performance, which in turn could be reflected in the funds we buy.
Still a long way to go
We recently asked our fund managers about their perspective on gender. On average, 18% of the portfolio managers we hold are female (82% are male) – up from 15% last year and better than the industry average of 12%. The figures for investment analyst teams are more encouraging with 35% female – also an improvement on last year’s 32%.
Encouragingly, we found that 57% of our fund managers are signed up to the Diversity Project, which is up from 44% last year. You can find more information on the Diversity Project here.
Although progress has been made, there’s still a lot of work to do to get more women into portfolio management roles within our industry. It’s clear it enhances investor outcomes, but there are lots of other benefits. Diversity from all angles, including gender, age, background will only further enhance decision-making and offer a broader range of viewpoints and experiences.
(1) https://citywire.co.uk/Publications/WEB_Resources/alpha-female/alpha-female-2021-sterling.pdf
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.