Article: The Portfolio Management Gender Gap is Big and Investors are Losing Out

Scott Treacy, Cady Ridall, Damian Handzy | August 18, 2021

Investment Metrics looked at 224 asset managers to examine the gender balance and found that women portfolio managers outperform their benchmarks proportionately to their male counterparts:

  • Only 29% of all managers have at least one woman on the portfolio management team;
  • 13% of managers have a woman in a lead or co-lead position and 7% of managers have a woman as the CEO;
  • 49% of all asset management firms have published diversity and inclusions initiatives versus  62% of woman-lead asset managers   
  • Women are just as likely as men to outperform the market: among outperforming funds, women are represented in proportion to their participation in the general population of portfolio managers. 

Women are still severely underrepresented in the management of institutional investor portfolios despite strong concerns about the lack of gender diversity. The Securities and Exchange Commission (SEC) is a vocal advocate for greater representation. In July, the regulator called for mandatory disclosure of Diversity and Inclusion (D&I) data at the Director level in a bid to increase diversity in the industry. The UK’s Financial Conduct Authority is also calling for vastly improved diversity and inclusion across financial services.

Investment Metrics analyzed its global asset manager database to better understand the gender gap and to track the performance of women-led teams. We looked at 224 asset managers across US Large-Cap Value, US Large-Cap Growth, All-world, and Global Active Manager Public Equity peer groups (separate accounts and co-mingled funds). The analysis compared the active returns of these portfolios against the benchmarks to see which women-led team had the most consistent and best performance over the past seven years.

Figure 1: Representation of women among portfolio management teams in various roles together with D&I policies.

The data is sobering: As shown in Figure 1, 29% of the 224 portfolios we examined had a woman on their portfolio management team. 13% of the active equity peer groups had a woman in the lead position or the co-lead portfolio manager position and only 7% had a woman CEO. 

However, 49% of these asset managers published D&I initiatives on their websites, suggesting the intention to improve the situation. Not surprisingly, firms with a woman in a leadership role are more likely to have a D&I initiative; 62% of firms with female-lead or co-lead teams have a robust and effective D&I policy. 

The largest three asset managers (based on total equity assets) who have, and have not, published their D&I initiatives on their websites are shown in Table 1:

Table 1: Three largest Asset Managers who have and who have-not published their Diversity and Inclusion initiative on their public websites.

While it’s clear that women are underrepresented among portfolio management, we examined how well they have performed compared to their male counterparts. Specifically, we looked at the fraction of women-participating and women-run asset management firms in the top half and top quartile of all managers and examined 7-year, 6-year, 5-year, 4-year and 3-year returns. In both cases of women-participating and women-run funds, the fraction of top performing asset managers with women portfolio managers is representative of their membership in the broad population of asset managers across all time frames examined, as shown in Table 2.

Of these top-performing firms with women on the portfolio management teams, which are consistently outperforming? Loomis Sayles, Hardman Johnston Global Advisers and ClearBridge Investments are the clear winners. See the Table 3 below. 

Table 2: Percentage of asset managers with women on the portfolio management team in outperforming funds (top) and with women-lead portfolio management teams in outperforming funds (bottom). In both cases, the funds with women on the portfolio management teams are proportionately represented to their participation in the population of portfolio managers (29% and 13%, respectively).

Those firms with women on the Portfolio Management team also have higher commitment to diversity and inclusion. While 40% of all asset management firms have published diversity and inclusions initiatives, 62% of woman-lead asset managers have publicized their commitments. With recent signals from the SEC and FCA recommendation changes to the D&I disclosures, we expect these numbers to greatly increase in the future – and rightly so.

Table 3: Top three most consistently outperforming women-led/co-led portfolio managers year-over-year between 2014 and YTD through June 2021.

Sample and Methodology

The data came from the Investment Metrics Global Database (Join – Global Database (invmetrics.com) and is based on data submitted by asset managers for the period ending June 2021.  We reviewed a sample of the US large-cap value (approximately 60 portfolios), US large-cap growth (approximately 60 portfolios), All-World large-cap (approximately 60 portfolios), and the Global large-cap equity universes (approximately 45 portfolios).  The benchmarks we used to calculate the active returns were the Russell 1000 Value, Russell 1000 Growth, MSCI All-Country World, and MSCI Global Indices.  The sample represents approximately 150 asset management firms across 224 different portfolios.   A list of the firms included in the analysis appears below:

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