The Performance of Women-Led Investment Portfolios Matches That of Men
According to a recent study by Morningstar, portfolios managed by women have demonstrated investment performance on par with those managed by men.
Diversity in Asset Management: Morningstar’s Insight
Morningstar’s inaugural report, titled Diversity in Asset Management, delves into the dynamics of diversity within asset management firms, exploring variations in representation across different levels, the intersectionality of gender and race, and how gender-diverse teams impact investment performance. This comprehensive analysis reveals that there is no significant correlation between gender and investment outcomes. Despite this, the study highlights that women, as well as Black and Hispanic individuals, remain significantly underrepresented within portfolio-management teams. However, a slight increase in diversity among analyst ranks may indicate potential shifts towards more inclusive upper management in the future. Research supports the notion that diverse management teams typically arrive at better decisions, while asset managers express a preference for collaborative approaches that integrate diverse viewpoints in their portfolio-building process.
Evaluating Diversity Across US Asset Management Firms
The latest survey, encompassing over 146,000 employees from 40 different asset management firms, reveals these firms collectively oversee more than $16 trillion in assets managed within the US. Notably, more than 53,000 of these individuals are white men, comprising over one-third of the workforce. This demographic often fills prominent roles such as executive leader, portfolio manager, and investment trader, overshining those in operational or support positions.
Gender and Race Representation in Asset Management
By comparing the demographic data of asset-management employees with US Census statistics, certain discrepancies become apparent. Female representation across most racial and ethnic categories appears to be markedly low. For example, while white women constituted 29% and Hispanic women 10% of the US population in July 2023, they only made up 25% and 4.9% of asset management roles, respectively. In contrast, Asian women are overrepresented in this field, holding 7% of positions despite being only 3.2% of the US populace.
Underrepresentation of Black and Native American Professionals
Within the Black community, both men and women are generally underrepresented in asset management, but the disparity is significantly more pronounced for Black men. In July 2023, Black men accounted for 6.1% of the US population versus only 3.5% in asset management, while Black women represented 6.6% of the populace, but just 5.5% in the industry. Furthermore, Native Americans comprised only 0.2% of the asset management workforce, a much lower figure compared to their 0.7% representation in the overall US population.
Women in Leadership: A Promising Pipeline
Focusing on asset management roles, while women constitute just over half of the US population, their presence remains limited in certain specialized functions. However, women hold a more significant share in broader executive, senior leadership, and general investment professional roles, suggesting a more optimistic outlook for the future. Interestingly, female representation in executive and senior leadership roles averages around 29%, but ranges dramatically from 0% to 67%. In the category of other investment professionals, the median representation is slightly higher at 30%.
Emerging Potential: Women Analysts as Future Leaders
Notably, the role of women as portfolio managers is still minimal, with a median representation of just 16% among surveyed firms. However, there is a more positive trend in the ranks of investment analysts, where women hold a median of 25%. Since companies often promote portfolio managers from these analyst ranks, this indicates a hopeful shift toward increased gender diversity in the future.
Importance of Diverse Analyst Teams for Future Leadership
Moreover, investment analysts currently represent one of the most racially diverse groups within the industry. Their more substantial team sizes may serve as essential talent pools for future portfolio management positions, highlighting their importance as indicators for future diversity in leadership roles.
The Impact of Women on Team Composition and Management
Data from Morningstar shows that women manage significantly fewer funds than their male counterparts. In the past three years, there have been only 54 all-female teams, less than 1% of consistent portfolio management teams. When combining mixed-gender teams with women-only ones, women are involved in roughly 25% of mutual funds, with declining percentages for longer time frames. Despite this, the overall influence of women-led teams on assets under management (AUM) remains almost negligible, with less than 1% of AUM being managed by women-only teams over three, five, and ten-year spans.
Analysis of Performance by Gender Makeup
An evaluation of fund performance based on gender makeup reveals mixed results. Using the information ratio to assess risk-adjusted returns among actively managed funds categorized by their management teams – women-only, men-only, and mixed-gender – data from June 30, 2024 indicates that fund performance is relatively close across the board. For instance, between 21% and 30% of men-only and mixed-gender managed funds fell into each performance quartile, maintaining a consistent distribution across the evaluated years.
Conclusion: Looking Ahead
While women-only management teams showcased remarkable performance trends, the overall numbers are too small to draw definitive conclusions about their superiority compared to mixed-gender or male-only teams. The study emphasizes the need for continued efforts to improve diversity within asset management so that future generations can lead with varied perspectives and inclusive practices.
