Hedge funds require substantial start-up capital, the willingness to take huge risks and also to fail – hard. This subset of the financial industry is not for the faint of heart, but the financial rewards for those winning the game are huge. Not surprisingly, women are vastly underrepresented in the hedge fund world, as is the case for financial services in general. Just a small portion of the $2.6 trillion invested in hedge funds are run by women. However, even in this risky, ego-driven industry, women can and do excel. Professional services firm Rothstein Kass conducted surveys, and for two years in a row, hedge funds managed by women outperformed those run by men. The survey looked at hedge fund performance from January 2013 to the end of November 2013. Hedge funds run by women returned 9.8% compared to the HFRX Global Hedge Fund, which was up 6.13%.
Some point to women’s supposed risk aversion or willingness to incorporate changes after mistakes are made as reasons for the outperformance. Whitney Tilson, a hedge fund manager himself, wrote an honest, if bleak, assessment of the lack of women hedge fund managers in The New York Times. In it, Tilson relays the statements of a female colleague:
“Women were disproportionately fired in the 2008 crisis, and most ended up leaving the industry, either because they couldn’t find new jobs or because the jobs they could get offered pay cuts of 50 percent or more from what they made before (the same applies to most men, in fairness). If you can make the same money in a corporate job with less stress, fewer hours, more flexibility and more tolerance of the demands of motherhood, you really have to love this business to have stayed, particularly as a mom.”
And a few paragraphs later, this line really jumped out at me:
“Regardless, I don’t think we will see more female hedge fund managers until we see more female hedge fund analysts. This problem extends across finance/asset management, not just hedge funds.”
If you want to begin to solve the problem of gender inequality, the pipeline of professionals progressing through the ranks is a place to start. However, this is far from a simple strategy — unconscious bias will take a long time to dissipate. In the words of one hedge fund manager, Paul Tudor Jones, who believes women will never measure up due to their roles as mothers:
“You will never see as many great women investors or traders as men. Period. End of story. And the reason why is not because they are not capable. They are very capable.”
If women were disproportionately let go in the 2008 crisis and there are few female hedge fund analysts who could eventually become managers, that tiny proportion of hedge fund assets managed by women won’t budge. There is some movement on the part of institutional investors to seek out women-run investments, but this strategy still remains a “socially responsible” investing niche. The discourse continues. What could turn the tide toward parity? Investors themselves and the market’s desire for better results. If women hedge fund managers are outperforming their male counterparts, yet there are fewer of them, the losers are investors. With more women running these funds, there is more money to be made.