I was pleased to read yet another article supporting the importance of women in portfolio management. The article (found here) cited a recently released report which found that an index of hedge funds managed by women outperformed the HFRI Global Hedge fund Index over a 6.5-year period. During that time, the female-managed fund index rose 6%, while the HFRI declined 1.1%. Of course, the sample size was relatively small, as only about 125 of the 10,000+ hedge funds have female portfolio managers. Still, the data seem to support the notion of gender diversity in investment management. There have been many articles written about how men and women differ in their approach to investing, indicating that women investors on average have a performance edge on men.
Many theories abound as to why this might be the case. Some of the most popular theories are that women tend to be more risk-averse (less testosterone) and are therefore less likely to take risky bets that don’t pay off. Another theory is that women lack “over-confidence” leading them to trade less, which has shown to contribute to outperformance. This particular article also suggested that these women hedge fund managers took a longer-term view compared to their male counterparts, which paid off over the time period in question.
Fortunately, Parsec is ahead of the curve when it comes to gender diversity in the investment management arena. Three of our five CFA charterholders are women, and are active members of our Investment Policy Committee. We don’t really know the reasons behind the findings in these studies, but some of the theories described above make sense to us. At Parsec, we don’t see this as a gender issue, just good investing. Our philosophy has always been one with a long-term view that eschews market timing and excessive risk-taking. While this approach doesn’t guarantee outperformance, it is a prudent way to invest for retirement, and we do know the research supports that.
Sarah DerGarabedian, CFA