Women in hedge funds: would you like to see more female funds?

Women in hedge funds: would you like to see more female funds?

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What’s keeping women on the margins? Mostly bias, culture and a harsh business climate – but not always in ways you’d expect, write Institutional Investor’s Amy Poster and Frances Denmark. What would it take to see more female-led funds?

“To see more female launches requires more female portfolio managers to be currently managing portfolios at well-­established, premier hedge funds, so that they have the right backing when they step out on their own”, contends Victoria Hart at Pinnacle Capital. Until that happens, those who are fortunate to be part of the inner circle have an advantage.

Whether they’re first thinking of going into finance or ready to launch a hedge fund, women need well-developed career networks to have their best shot at success. These networks will need to provide a viable and equivalent substitute for what PAAMCO’s Jane Buchan describes as men’s career advancement advantages: similar backgrounds, schools and jobs.

Whereas men have traditionally recommended, promoted and aided their fellow managers’ careers, women, being late to the game, have not developed these informal but crucial conduits. Now some astute women in finance are working to build these missing links.

One such initiative is 100 Women in Hedge Funds. The non-profit group was started in 2001 to provide a leg up to women in the industry. Today the organization boasts 15,000 members around the world and hosts a variety of educational, networking and fundraising events. In January 2015 the group launched its Next Gen agenda to inspire, mentor and provide support to young women looking to start careers in finance and investment. “Our goal is to provide women across the board whether they’re in high school, college or entering the industry access to internships, mentoring and peer networking”, says the groups’ chair, Sonia Gardner, who is co-founder and president of New York-based, $11.6 billion global investment firm Avenue Capital Group.

Last year 100 Women in Hedge Funds held allocator symposiums bringing together institutional investors and female portfolio managers. The events, in San Francisco and New York, attracted nearly 100 allocators and 75 managers. The organization’s London chapter launches a European version this month. Compared with many other allocator gatherings, the event’s female-only focus and exclusive invitation list provide more opportunities for attendees to meet institutional investors.

Women in hedge funds: how can they get to the top?

Girls Who Invest is focusing its efforts on younger minds. Founder Seema Hingorani, formerly CIO of New York City’s five public pension funds, believes reaching out to women at the university or even high school level is the best way to develop a pipeline of talent for the industry. “Our program is dedicated to exposing young women to asset management”, she explains. “But at the very least, we also want to prepare them to manage money for themselves and their family.”

The group will hold its first training class, a four-week program for 30 college sophomores and juniors at the University of Pennsylvania’s Wharton School (Hingorani’s alma mater), this summer. The program will focus on core financial concepts and asset valuation, and teach students about the asset management ecosystem. After the program participants will be placed in internships at several large asset management and hedge fund firms. They won’t be learning only from other women, Hingorani points out:

“There are a lot of enlightened men in our industry, and we need to partner with them to be successful in our mission.”

Businessman Reflection (Credit: John Fraissinet)Another initiative helping women build career networks is Women Moving Millions. Founder Jacki Zehner was the first female trader to make partner at Goldman Sachs, in 1996. She left Wall Street more than a decade ago, trading in power suits for rugged outdoor wear in Salt Lake City and embarking on a crusade to promote opportunities for women through her family foundation. Her latest effort has gathered more than 230 members, who have pledged close to $600 million to benefit organizations and initiatives for women and girls around the world. “There is this saying that privilege is invisible to those that have it”, Zehner says. “I think the same is true for bias, including gender bias. You cannot look at the numbers and say it does not exist; it has to. Then the question becomes what to do about it.”

Is it up to institutional investors to challenge the status quo?

Institutional investors and the consultants who support them clearly have a stake in changing the status quo for women. “While performance must always be central to allocation decisions, we must consider adjusting some of the other inputs, like length of track record and minimum AUM requirements, if we want a different outcome”, says Lenox Park’s Lamin, who advised Texas Teachers on its 2013 initiative on emerging manager best practices. The organizations that have been successful in sourcing and allocating to smaller managers have been very intentional about reviewing their current effort and then adjusting their approaches accordingly. Unfortunately, there aren’t very many of them to speak of.

Rushed StepAside from building women’s networks and developing a pipeline of female talent into the asset management and hedge fund industries, structural changes will need to take place at the investor level.

One example: relaxing standards to allow public pension funds to allocate to emerging fund managers with less than a three-year track record.

The current investment consulting business model also may need to change to allow deviation from the established, industry-wide due diligence standards for allocation consideration, to allow gender diversity and inclusion to become part of both consulting and investor institutions’ cultures and systems. Once senior management sets the tone for inclusion, gender diversity stands a fighting chance.

This article originally appeared in Institutional Investor – read it in full.

Amy Poster and Frances Denmark
Amy Poster is a risk and regulatory consultant. She is also currently a contributing writer at Institutional Investor magazine. During the financial crisis, she served as senior policy adviser at the U.S. Department of the Treasury’s Office of the Special Inspector General-TARP. Prior to that job, she was the global valuation and risk controller for credit products at Credit Suisse. Frances Denmark has been a senior writer at Institutional Investor and Institutional Investor's Alpha since June 2007. Prior to that she was a contributing writer for II publications as well as for Plan Sponsor, Wall Street & Technology, Bloomberg Wealth Manager and Trader Monthly. With a primary focus on "mission-based" investors of pension and retirement plans, endowments, and foundations, Fran also covers a range of subjects from asset management to financial technology and tweets from @francesdenmark.

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