Gender and other biases represent a problem for the fund management industry, especially among alternatives managers, according to participants on both sides of an industry debate last week.
The debate, before an audience of about 80 fund management professionals, was produced by CFA Society of Sydney, in collaboration with 3TOM, a group which represents women working in investments, Women in Alternatives, the global Chartered Alternative Investment Analyst Association (CAIA) and sponsor Citi.
The main organiser of 3TOM (Third Thursday of the Month), Celine Kabashima, a portfolio manager at AMP Capital, said that diversity was an industry issue – not just gender diversity, but also ethnicity, cultural, religious and background diversity. But it was also a complex issue.
The debate was held, on June 30 in Sydney, under the Chatham House Rule, given that the views expressed were not necessarily those of the individual debaters. For the audience, however, what was said hit a chord. They discussed three questions:
- Do we have behavioural biases with respect to gender, culture, religion, background etc.?
- With so few female portfolio managers in the alternatives area is the structure of the industry biased against women becoming PMs?
- Is affirmative action the answer to improving gender diversity?
The debaters were: Suzanne Tavill of Stepstone, Victoria Shelton of Amundi Asset Management, Sam Mann of Franklin Templeton Solutions (K2 Advisors), Bruce Murphy of Insight Investment, Laurence Marshbaum of Sunsuper and Karen Jorritsma of Citi.
“We are racist, sexist, xenophobes,” it was suggested at the outset. “Blokes tend to want to invest with other blokes. In the US, 90 per cent of hedge funds are run by males… It’s a classic case of in-group bias,” one of the male debaters said.
“Less than 1 per cent of PMs in alternatives are female,” someone else said. “But outperformance doesn’t know whether you are male or female… There’s definitely a male locker-room feel to this business.”
A report by KPMG showed that women hedge fund managers, or firms headed by women, tended to outperform, it was claimed.
As Shakespeare said: ‘herein lies the rub’. Whether or not women tend to be more risk averse – and the evidence is they are – they tend to have different attributes across the range of management styles. As is well established, for instance, is that women tend to be more inclusive and less autocratic than men. They will be less likely to promote themselves ahead of others. They are much more ESG friendly and the growing evidence is that ESG friendliness is good for business.
Sam Mann suggested some reading on the subject:
> https://www.theguardian.com/business/2015/sep/29/companies-with-women-on-the-board-perform-better-report-finds
> http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4473005/
> http://www.ft.com/cms/s/2/d65795f2-0de6-11e5-9a65-00144feabdc0.html#axzz4CACtRZ2I
> http://www.wikigender.org/wiki/debate-on-gender-quotas/
Notwithstanding their opposing sides in the debate, the consensus among the speakers seemed to be that diversity works. You get better decisions when you have a diverse group of people making them.
“Bias is embedded in society,” it was said. “For example, in the US, studies have shown that tall ex-football players will tend to get better jobs for more money than other people… We need to break the habits. Affirmative action does this. It has the potential to increase the collective welfare of society.
On the other hand, it was suggested, that affirmative action was too blunt an instrument. “The problem is an important one so we need top take a more sophisticated approach, such as through education,” it was suggested. “You can’t fix what is an unconscious bias with a quota.”
While men may think that this debate doesn’t matter too much, that it may even be a little frivolous, for women approaching retirement it is deadly serious. Until there is true gender equality in employment, more women will be living in less comfort in retirement than men. And that is just not fair.
* Greg Bright is publisher of Investor Strategy News (Australia)