Need A Better Investment Strategy? Listen To A Woman

New data reveals that female hedge fund managers outperform their male competition.

Male hedge fund managers, watch out for your jobs: a new report from financial services firm Rothstein Kass has revealed that female hedge fund managers significantly outperform their male counterparts. In the third quarter of 2012, they scored a net return of 8.95% (according to the Rothstein Kass Women in Alternative Investments Hedge Index) compared to a 2.69% net return overall on the HFRX Global Hedge Fund Index. But at the same time, women make up less than 20% of all C-suite members in the firms polled. Not enough people have yet woken up to the fact that it makes sense to hire more women in senior positions.

Rothstein Kass’s report surveyed 366 senior women involved in the alternative investment industry (hedge fund, private equity, and venture capital). The respondents revealed that there are two big reasons why more women don’t get senior-level positions: there is little motivation among women to remain in the sector, and there aren’t enough positions for women to get a good track record. As the report notes, "The phrase 'old boys’ club’ was employed multiple times."

When we published a series of pieces by Jean Brittingham about the gender-related traits that make female entrepreneurs successul, we received a number of comments complaining that Brittingham was being sexist. But there are indeed specific traits that make women successful in business, according to Rothstein Kass.

"The fact that women-owned or managed hedge funds have been able to handily outperform their male counterparts is not particularly surprising," said Meredith Jones, the study author, in an interview with Business Insider. "There have been a number of studies that show women investors to be more risk adverse, and therefore potentially better able to escape market downturns and volatility." The report goes on to say: "… if women do in fact have a different, more risk-averse investing profile, then at least theoretically, their returns, particularly in difficult markets, should be higher than those of their male counterparts." And that seems to be what’s happening.

While the alternative investment industry has been slow in promoting women to the C-suite, there are signs of progress—you can’t ignore the numbers, after all. The report notes that some states, including New York and Illinois, have mandates for diversity in their asset management firms. Rothstein Kass also observed an uptick in both female and minority-owned requests for proposal from institutional investors. The Maryland State Retirement and Pension System, for example, gave a $44 million allocation to a female-owned hedge fund.

All indicators point towards an increase in female alternative investment leaders, but the revolution will be slow, especially because of the industry’s poor work life balance (18.5% of respondents said that they want to work part time/flex time). Nonetheless, it’s happening.

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  • Sabastianhaan

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  • Maegan Anderson

    Now is the time for the women to be treated like men.There are times that we are taking for granted the things that women can do and ignore their ideas. The percentage of their net return above is a statement that we must also listen to them.Great article Ariel!

  • Ugh

    Women tend to be more cut throat and less stubborn. Though life experience has taught me women are less logical about finances especially in terms of debt.Wait, I have an idea why don't we all work together as people to negate our collective shortcomings?    

  • JD

    There's something to be said for improving the organization by
    making the best combination, rather than the most equal, or any
    other group with a single characteristic. Not one example is given as
    to how
    women are better hedge fund managers [you implied they're more risk
    averse in a challenging economy by using other people's words to cite "numerous studies", but you never explained how, or verified any study, let alone
    showcased their strengths in a long term recovery], or how they relate
    with peers, executives, and clients, or illustrated a
    predominantly female investment group of any
    size or specialty. Try
    researching and writing stories about successful corporate women if
    that's what you believe in. Show us how corporate women succeed in their
    own words
    so we can relate to them, and uncover what matters to them. I've
    noticed that women who get to the top usually disagree with the premise
    of this article, as recently as when I saw Marissa Meyer on HuffPo video
    with a female interviewer, so finally explain the reason for your
    disagreement with them. I get that this is a blog post and you're preaching to your choir, but this "quality" of writing is a better explanation for why women fall and stay behind, which is sad.