Women-owned or managed hedge funds and private equity funds continue to outperform their male counterparts, but 73.5 per cent of investors anticipate that allocations will remain the same in 2014.
That is one of the findings of Women in Alternative Investments: A Marathon, Not a Sprint – Rothstein Kass’s third annual report examining the performance, prospects and outlook of women in the alternative investment industry.
The report includes a survey of 440 senior women in the alternative investment industry, including fund managers, investors and service providers, as well as proprietary performance analysis of women-owned or managed private equity and hedge funds.
The report reveals that 24.5 per cent expect allocations to increase somewhat, and 2.0 per cent expect allocations to women-owned or managed funds to increase significantly. Roughly 93 per cent of investors stated they had no specified mandate to invest in women-owned or managed funds.
“While the lack of an official diversity investing program does not necessarily mean that investment into women-owned and managed funds is not taking place, the pace of investments is definitely slower than many had hoped,” says Kelly Easterling, principal-in-charge of Rothstein Kass’ Walnut Creek office. “In the investment management industry, demand is almost always one of the key drivers of supply, and at the moment, investors and women-owned and managed funds are faced with an interesting ‘chicken or the egg’ dilemma when it comes female-led funds. The lack of women-owned and managed funds almost precludes large-scale investments, particularly by institutional investors. On the other hand, until there is more money flowing to women-owned and managed funds, it is unlikely that there will be a huge influx of new fund launches.”
“Lack of supply” of women-owned or managed funds was cited as one of the most common reasons why investors do not have a specific women-owned or managed fund investment mandates, but the survey shows that the number of women planning to launch their own funds is trending upward. In this year’s report 17.5 per cent of respondents said they have a five-year career goal of managing their own fund, up from 14.2 per cent in last year’s report.
The report also revealed that women-owned or managed hedge funds continue to perform ahead of the industry benchmark. For the six and a half years ending June 2013, the Rothstein Kass Women in Alternative Investments (WAI) Hedge Fund Index returned six per cent, while the S&P 500 gained 4.2 per cent and the HFRX Global Hedge Fund Index dropped 1.1 per cent during the same period. Although performance comparisons are more difficult in the private equity space, a small sample of women-owned or managed private equity funds reported net returns of 14.8 per cent in 2012, topping the Cambridge Associates private equity fund index number of 13.8 per cent.
“Our research shows women-owned and managed funds continue to demonstrate strong performance during what has been a difficult period for many alternative investment funds,” says Meredith Jones, director at Rothstein Kass and head of the Rothstein Kass Institute, the firm’s industry think tank. “Women simply perceive risk differently than men and tend to manage their portfolios accordingly. This results in less performance slippage, a diminished tendency to sell at the bottom, and a more consistent application of their strategies. Over time, these traits can create a meaningful and persistent performance differential. At the end of the day, we believe this consistent outperformance will drive performance-hungry investors to increasingly allocate to women-owned and managed funds, spurring more launches as well as hiring trends in the industry. The only real question is the timing of this trend. Based on our survey results, real progress has already taken longer than most women expected.”
More than half of those polled (59.7 per cent) believe there will be more women in the alternative investment industry in 2014 and beyond than there were in prior years. In addition, the percentage of respondents who agreed or strongly agreed that their gender makes it harder to succeed in the alternative investment industry decreased slightly to 61.3 per cent from roughly two-thirds in prior years.