Gender diversity: Moving towards a more diverse asset management industry
By Daniella Skotnicki, Harneys – The investment management industry relies on innovative and diverse strategies to create alpha and add value for investors. Whilst the benefits of gender diversity have been widely recognised, the industry, like most others, has lagged in achieving it.
There has been increasing focus from investors in strategies which increase gender diversity amongst the portfolio management team and the industry generally. The challenge is, however multifaceted, structural in that there are far fewer women than men entering into the traditional feeder courses and careers into portfolio management, such as investment banking, and requires the overcoming of outdated and incorrect gender biases relating to women managing large amounts of money.
Analysis by Morningstar showed that bond funds run by women outperformed those helmed by men from 2003 to 2017. However a paper prepared by the Alternative Investment Management Association, in conjunction with Ernst & Young, on inclusion and diversity in the hedge fund industry noted that: “a visitor looking about in the office of an “imaginary average hedge fund firm” will see that 80 per cent of the workers are men. If they are looking specifically at the senior management team, that number will be 90 per cent.” In some markets the statistics were somewhat more promising; in Hong Kong, Singapore and Spain, more than 20 per cent of fund managers were women. But the percentage in the UK and US were both below the worldwide average, at 13 per cent and 11 per cent, respectively.
There have been positive moves amongst our clients to gender equality, such as fund strategies focussing on investment in companies with diverse boards and increased allocations by investors to investment managers with female teams. Impact investing has attracted more capital and is particularly attractive to millennial investors; investment in funds which focus on increasing gender diversity fits is one form of impact investing which is gaining popularity. As You Sow has developed a gender-equality fund screener* to identify funds that invest in companies with a good gender balance between their leadership (including their board of directors) and their overall workforce, as well as companies with strong policies on issues like equal pay. An example of impact investing is the Fidelity Women’s Leadership Fund, an actively managed equity fund that “invests primarily in companies that prioritise and advance women’s leadership,” per Fidelity’s website.
Another trend gaining traction is gender lens investing (GLI). As GLI becomes more mainstream, managers will be put under pressure to report on advocacy, transparency, and accessible and meaningful gender metrics to investors. As women’s wealth grows, we expect to see continued support to ensure managers are held accountable for gender inequality not just in leadership roles.
Ellevest is an investment manager whose strategy is based on the premise that traditional investment products do not always meet the needs of women, for instance, women outlive their male counterparts, on average, by six – eight years. Women, unlike men, do not assess risk in terms of standard deviation but rather are more focused on a holistic understanding of how ‘bad can it get’ and the associated impact. In line with their target market, Ellevest have a diverse team lead by Sallie Krawchek.
Harneys has grown to be a leading offshore firm and a large part of our success has been our ability to identify and harness the benefits of diversity. As investor characteristics and expectations have evolved, so too has our practice. Long before “cognitive diversity” attained buzzword status, Harneys has quietly been embracing and harnessing the value it represents and has consciously created a workforce that reflects these values. At Harneys, our commitment to diversity is woven into the fabric of our offices, we have approximately 46 per cent female representation in senior leadership roles – we are committed to recognising potential and cultivating talent. We have witnessed the unique perspective and value women add to the offshore legal arena.
Our commitment to identifying talent starts from our scholarship recipients and Articled Clerks. They are a blend of age, backgrounds and unique individual strengths. It is this strategy that has aided us, having identified talent and potential.
Despite some advances in the industry, it will be a long road but at the very least there is recognition of the issue, if not the solution. Impact investing and specific allocations to female managed teams will assist in increasing gender diversity, however the solutions need to be broader based and structural changes are required in the industry.
Daniella Skotnicki, Partner, Cayman Islands, Harneys
Daniella Skotnicki is a partner in the firm’s Cayman office. She has over 12 years’ experience and a broad private funds practice specialising in hedge funds and private equity as well as advising on fintech related matters. Daniella has extensive experience advising fund sponsors on the structuring and formation of funds, co-investment vehicles and alternative investment vehicles and providing ongoing advice.
Daniella’s practice also encompasses advising on mergers and acquisitions, joint ventures, listings on the Cayman Islands Stock Exchange, security token offerings, initial coin offerings and corporate reorganisations. Daniella acts for leading financial institution and investment managers as well as boutique and start-up managers and fintech companies.