Just before the 2008 global financial crisis, some determined women were beginning to enter the upper echelons of hedge fund management. But in the following years progress stalled. Although many women who launched funds before 2008 remain successful, their numbers have not increased significantly, and some have seen their firms founder.
According to a March 2015 report by alternative-assets data provider Preqin, women hold only 10.3 percent of C-suite positions at single-manager hedge funds and 11.1 percent at funds of hedge funds.
A number of factors explain the low numbers, industry executives say. The financial crisis caused a shakeout in the hedge fund industry, and a stretch of mediocre performance in recent years has led many investors to cut back their hedge fund exposure the California Public Employees Retirement System and the New York City Employees Retirement System have decided to get out altogether or concentrate allocations among fewer firms. Those forces are making it harder for new managers to break into the business. And for most women it’s harder to get started or reach the top tier of the hedge fund industry than it is for their male counterparts in any climate. They are underrepresented in many of the key precursors to hedge fund success, such as MBA programs. They often lack the deep network of connections that can spell the difference between success and failure. Some studies have shown that women hedge fund managers have a harder time raising money than men do and need to perform better to survive.
Marcia Page, who will step down later this year as CEO of Minneapolis-based Värde Partners, believes it’s more difficult for new players, particularly women, to break into the business today than it was when she helped found the now-$10 billion distressed-debt firm in 1993. “It’s been so clear that since 2008 fundraising has been challenging even for the more established funds as due diligence has intensified”, says Page, who will stay on at Värde as chair. “New funds are at a disadvantage, as you literally have to knock off an incumbent manager to take their place. I would have expected the pipeline for women in finance to be significantly deeper than it was 30 years ago, but that isn’t the case.”
To be sure, there are female success stories out there. Last year star quantitative manager Leda Braga branched off from BlueCrest Capital Management and set up her own firm, Geneva-based Systematica Investments, to run her $10.2 billion BlueTrend managed-futures strategy. Last month Braga was No. 44 on the 2016 Rich List of Institutional Investor’s Alpha, with earnings of $60 million. It was the first time in 15 years that a woman had appeared on the magazine’s annual ranking of the 50 highest-earning hedge fund managers.
How can women get to the top in asset management?
Hedge funds don’t exist in a vacuum. They sit at the top of the asset management ladder – the most competitive and lucrative perch in the industry. For women to play a bigger role, they need to make progress all the way up the ladder. As Matarin Capital Management’s client development director. Marta Cotton puts it, “A bigger pipeline would make a difference.”
Yet the pipeline feeding the industry seems no bigger today than it was a decade ago, and many of the forces that have traditionally knocked women off the ladder are operating just as strongly today.
In 2013, 56 percent of U.S. undergraduate students were female, according to the most recent statistics from the Department of Education. But women are far less prevalent in the MBA programs that feed a lot of talent into the investment management industry. Some 36 percent of new full-time students at 36 leading U.S. business schools last year were female, according to the Forté Foundation, a nonprofit that seeks to promote women’s access to business education.
A recent study by Catalyst, a New York-based non-profit focused on women’s inclusion in the workplace, found that although more than half the employees of U.S. financial services firms are female, their representation in senior leadership positions remains low in every sector.
Among funds, trusts and other investment vehicles, women make up 52 percent of all employees, a rate that drops to 44.7 percent for first-tier and mid-level managers, then falls to 27.4 percent at the executive and senior levels. In investment banking and securities-dealing fields – that produce many hedge fund managers – women hold just 16.1 percent of executive and senior-level positions.
BlackRock’s senior commodities consultant Kathleen Kelley says she was keenly aware of her increasingly male surroundings as she rose in the hedge fund industry. “Analyst classes are 50-50 male-female”, she says, referring to the initial intake of new analysts, typically straight out of universities or business schools. But Kelley increasingly found herself the odd woman out as she progressed. “It’s hard to see where your career path is when you see rooms filled with men”, she says.
Jane Buchan echoes that sentiment. As co-founder and CEO of Pacific Alternative Asset Management Co., Buchan is a model of female success in the business. Irvine, California-based PAAMCO manages more than $10 billion in assets, making it one of the largest female-owned fund-of-hedge-fund firms in the world. Yet she says the industry has an ingrained male culture that continues to make it difficult for women to break through.
Perception bias, confirmation bias, and seeing mothers everywhere
Then, of course, there is the loaded issue of parenting. Motherhood has long been viewed as a career impediment, particularly in high-pressure jobs like hedge fund management. Shelley Correll, a sociology professor at Stanford University and director of the school’s Clayman Institute for Gender Research, says there is indeed a motherhood penalty, as it’s called in a 2007 paper she co-authored in the American Journal of Sociology. But she attributes it to a perceived incompatibility between family and workplace rather than to actual performance issues for working mothers. The paper was based on a study in which university students were asked to evaluate a variety of fictional job candidates with identical job qualifications but differing parental statuses. The evaluators consistently ranked mothers as less competent and less committed than women without children, or men. Fathers, by contrast, were ranked as the most competent, even ahead of men without children.
Paul Tudor Jones famously seemed to give voice to this perception bias at a panel discussion at the University of Virginia three years ago. “You will never see as many great women investors or traders as men period, end of story”, the celebrated hedge fund billionaire said. The reason, he explained, is not because they are incapable but because motherhood acts as a ‘big killer’ to the intense job focus that macro trading requires. Jones apologized after reports of his comments produced an outcry of complaints. Kelley, who had the first two of her three children while working at Tudor, says the environment at the firm was very supportive. She has nothing but praise for the mentor who gave her her big career break. “Paul is my hero”, she says.
Bias in other parts of the industry holds women back, many executives say. “The majority of allocators are men”, points out Dawn Fitzpatrick, New York-based global head and CIO of $5.6 billion hedge fund firm UBS O’Connor. “The academic data shows that people tend to want to work with people who look and act like them. We need to do a better job of educating people on the unconscious bias they have and the demonstrable benefits to bottom-line results of well-constructed team diversity.”
This story continues next week on GAIM Live, exploring how women actually perform in the top jobs in asset management. This article originally appeared in Institutional Investor – read it in full.