Women are currently underrepresented in the US fund management industry. At less than 10%, the share of women fund managers is much smaller than women doctors (37%), lawyers (33%), or accountants and auditors (63%). But multiple data points indicate that there will be greater participation of women in the years ahead.
What’s Inside?
A study of Morningstar’s database of US open-end mutual fund managers as of 31 March 2015 reveals that out of about 7,400 listed portfolio managers, less than 10% are women. In addition, less than 2% of assets in about 2.5% of funds are managed exclusively by women; the comparable figures for men are 74% of assets in 78% of funds. Mixed-gender teams manage 21% of funds, which represents about a third of the industry’s assets.
How Is This Article Useful to Practitioners?
Although underrepresented performance of funds run exclusively by women is comparable with funds run exclusively by men, the sample analyzed suggests that mixed teams tend to have the best performance. But the difference is narrow among the three categories. The authors also find that women tend to manage smaller funds in niche areas, such as municipal bond funds, alternative funds, and small-cap equity strategies. In addition, the funds led by women charge higher expense ratios than other funds.
The authors attribute this underrepresentation to a leaky pipeline of candidates because fewer women opt for the relevant educational programs. Only 37% of those holding a master of business administration degree are women and less than 17% of US CFA charterholders are women. The authors compare these data with other markets, such as Hong Kong, where about 27% of CFA charterholders and 25% of fund managers are women.
The authors draw attention to various data points that indicate that the participation of women in the fund management industry is expected to rise. First, the share of women fund managers at about 10% (roughly 700 women) is much smaller than the number of women CFA charterholders (17%, or about 8,500), which indicates a robust pool to draw from. Next, women are playing an increasing role in financial planning for couples. A study reports that women are primary decision makers for long-term retirement savings for 19% of couples (two times higher than in 2011). Third, by 2020, women are expected to control half of the private wealth in the United States. Finally, women already represent more than 25% of financial advisers.
Abstractor’s Viewpoint
CFA Institute has undertaken such initiatives as scholarships and awareness campaigns to encourage women to participate in its programs and in the industry. But there is a need for further continued research to better understand the current status of representation of various segments of society in the global fund management industry as well as the drivers of the participation and key trends. On the basis of such research, the fund management industry needs to take timely and appropriate action to achieve fair representation and diversification.