Gender diversity in fund management to come of age

Sarah Dudney interviews women across the fund management industry about their experiences and the initiatives that are being undertaken by their organisations, and reaches the conclusion that progress is being made.

Executive Summary
• Diversity is improving because of the efforts being made by fund managers to bring the problem to the fore.
• One way to get the message across about the importance of diversity is to link team leaders and division heads’ pay to diversity initiatives.
• To create a broader talent pool, asset managers are trying to resolve unconscious bias and cast the net wider in recruitment, as well as taking proactive steps to advance more junior women.

It has never been a better time to be a woman in fund management. A range of proactive industry-wide and company-specific diversity initiatives are empowering women to aspire to leadership. Trends such as a move away from star managers to teams, and more openness to flexible working, are changing the culture to enable women to thrive.

Yet clearly, the industry is still predominantly male. “I’ve been in the industry since 1998 and I haven’t personally experienced any advantages or disadvantages to being a female, but clearly the numbers are still below what you would expect or hope,” says Tineke Frikkee, CFA, lead fund manager of the Smith & Williamson UK Equity Income Fund.

“Diversity is improving,” believes Marilyn Watson, head of the Global Fundamental Bond Product Strategy Team at BlackRock, but “it is changing because we’re trying to force change rather than it drifting along.” Watson’s team includes four women besides herself, and two men. “I think we have a lot of diversity of thought and it really helps the team. Everyone has their strengths and weaknesses and things they do well, which are complementary,” she notes.

Building diversity in teams also creates a leadership challenge to ensure that different views are heard and a clear conclusion is made from a wide chorus of opinion.

Asset managers are keen to get a granular detail of diversity at their own firms and in the wider market, not just for gender but also analysing ethnicity and social mobility levels in the talent pool. Achieving this now is important to measure future progress.

Resolving Unconscious Bias 
To create a broader talent pool, asset managers are trying to resolve unconscious bias and cast the net wider in recruitment, as well as taking proactive steps to advance more junior women. “There are a number of levers we pull to accelerate their development through our organisation,” says Lynne Connolly, head of diversity for Standard Life. Women are aligned to a development coach and encouraged to take on a voluntary role to develop business skills. Women comprise 43% of Standard Life’s talent pipeline – a feeder pool to senior management.

Research has shown that men put themselves forward for an opportunity if they meet 70% of the criteria, but women feel they have to meet 100%. Recruitment professionals often have to act as undercover activists to encourage women to step forward for stretch assignments. Connolly, who mentors several women, said: “I have a lot of conversations with women about why wouldn’t you put yourself forward?” Lesley Martin, head of diversity and inclusion at Legal & General, agrees: “We’ve realised that we need to go and tap women on the shoulder and that’s what we do now.” She is also encouraging business heads to look at succession planning and ensure that talented women are prompted to apply for promotions.

Having a quorum of female leaders provides role models and also makes working life more comfortable for senior women themselves. “The more of you there are, the more it’s an accepted norm. You’re not the only senior woman, always pointed out as ‘our senior woman over there’,” says Emma Douglas, head of defined contribution at Legal & General Investment Management (LGIM). “It really is refreshing to be here as a group of senior women.” The firm is aiming for a 50/50 gender split by 2020. This has far-reaching positive implications for the employer brand for LGIM and others who promote this type of diversity target.

Making flexible or part-time working more widely available is a key component to retaining women, especially those with young children. “The belief that part-time working is part-time commitment” is still a challenge, says Sally Bridgeland, founder of Executive Shift, although the move away from star fund managers towards teams where flexibility can more easily be accommodated is helping.

Having children need not slow the pace of women’s careers, despite the oft-felt frustration that taking maternity leave has a time lapse effect on the career trajectory. Several senior women have come back to bigger jobs at L&G after going on maternity leave. “You don’t have to take your foot off the gas. We are the kind of organisation where you can have that balance,” Martin notes. “We do things for dads too. Research shows that more fathers want [flexible working] but are afraid to say so.”

Shared paternity leave legislation was only introduced two years ago, and asset managers are already seeing a modest yet encouraging amount of take-up. It is easy to forget how much progress has been made on this front.

Ultimately, diversity needs to be embraced throughout all levels of seniority, in an industry that is still predominantly male. The Diversity Project is campaigning for precisely this. Established last year, it consists of a 14-strong chief executive officer Advisory Board and a 20-member Steering Committee. It is a genuine way to bring practical collaboration between different asset managers and within firms.

“At board level people feel they have to do something. At lower levels, that urgency isn’t felt,” Frikkee observes. “It takes time and a constant repetition until it gets memorised that it’s good for a firm and not a side show. If we can actually either make more money or reduce our risk by having more diversity then both of these are sensible objectives.”

The catalyst to this urgency will come from asset owners and investment consultants. US pension funds have been asking managers about diversity statistics for years but that isn’t done widely in Europe yet. Cultural differences also explain the difference between US and Europe, where the US has a strong difference between US and Europe, where the US has a strong history of self-identification.

Willis Towers Watson is planning to ask asset managers to provide data about gender diversity, and might also look at flexible working arrangements. “Consultants want to see more diversity. I’ve noticed that in the past couple of years,” says Katy Forbes, CFA, fixed income director at Standard Life Investments. “There have been meetings where the sales person on our side has requested that I do it, because they want to see more diversity.”

A crucial question is whether diverse teams deliver better investment performance. While several studies have shown that companies with women in leadership perform better, and that diverse teams make better decisions generally, there is insufficient analysis of how mixed gender investment teams perform. An obvious statistical problem is the still-small data set.

There is a growing consensus among market participants that diversity should theoretically lead to better investment outcomes. For a 2016 paper on gender diversity in investment management, the CFA Institute asked investors and CFA members if they believed that mixed gender teams perform better because of more diverse viewpoints. Seven in ten (65.9%) female CFA members and 42.5% of male CFA members agreed. A majority of those CFA members (55%) who disagreed would still prefer to work for a firm whose corporate culture is supportive of gender diversity. (However, 45–46% respectively of the retail and institutional investors polled said gender diversity does not matter for managing investments.)

Asset management “is constantly evolving and it’s also more global, so diversity within the investment field is a benefit,” notes Jose Gerardo Morales, a global equity portfolio manager. “You have to analyse so many different variables, and the more diversity in perspectives, the better you can do your job.”

A lack of diversity could even be detrimental to investment returns. Certainly, that is a view held in the post mortem of the financial crisis. “The echo-chamber effect, risk of group think and tunnel vision are serious risks for decision making,” believes Jane Davies, senior portfolio manager, UK multi-asset at HSBC Asset Management. “There’s a wealth of empirical evidence that people are more aware of now, that diversity leads to better decisions and better results.”

The Women in Finance Charter, which had 93 signatories by 8 November 2016, stipulates that an executive team’s remuneration should be linked to gender diversity targets. Ideally, asset managers would go even further. If team leaders and division heads’ pay could be linked to diversity, that would bring home the message – supported by a wide body of evidence – that diversity is good for business, capital allocation and client returns.


Sarah DudneySarah Dudney is a client partner at The Buy-Side Club. She has over 15 years’ experience in global asset management recruitment and contributes to the CFA UK Committee on Careers and Professional Development. She also supports The Access Project and is a founding member of the Diversity Project’s steering committee. She is passionate about driving the change towards a more inclusive culture in the investment industry and is proactively involved with integrating diversity into her clients’ businesses.

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