Why aren’t there more women fund managers?

Men still overwhelmingly dominate investment management, but women have made inroads, especially in money market funds.

If you’re looking for comforting news about the great strides women have made breaking into investment management, you won’t find it here. Men still overwhelmingly dominate the field.

But the inroads that women have made in money market funds show that there is a path to greater representation in the industry.

Morningstar Inc., the investment tracker, says only 8.69% of U.S. open-ended stock funds with named managers are run by women. The statistics in bonds are somewhat better: 9.37% of bond-fund managers are women. But that’s still well below the percentage of women in the overall population.

The data aren’t entirely bleak. If you define “fixed income” to include money market funds, the power of women portfolio managers increases vastly. Patricia Larkin, for example, runs more than $179 billion for Dreyfus. Federated Investors’ Deborah Cunningham manages $260 billion in money market fund assets. And Charles Schwab’s Linda Klingman handles about $619 billion in money funds.

In taxable money market funds, about 36% are run by women, according to data from Money Fund Intelligence. “Women have a long history in the money fund business and, anecdotally, it has always seemed one of the areas of the investment business that isn’t dominated by men,” said Peter Crane, CEO of Crane Data, which publishes Money Fund Intelligence.

Having women in the business tends to be a virtuous circle, at least among money market fund managers. “I think more women have started in money funds because they have more role models there,” said Marie Chandoha, CEO of Charles Schwab Investment Management. “I was talking to a woman portfolio manager here and asked what attracted her to the field. She said that there were two women portfolio managers who encouraged her to enter the business.”

‘A CULTURAL ISSUE’

There’s no particular reason, of course, why a woman’s place in investment management should be in a money fund, or a bond fund — or any type of fund in particular. But several studies, most notably a 2001 paper by Terrance Odean and Brad M. Barber at the University of California at Davis, have underscored the notion that investors on average would be better off if more women were involved with managing their money. The study, not surprisingly, found that male overconfidence led to excessive trading and, consequently, lower returns — to the tune of an average 2.65 percentage points a year.

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Many female managers are reluctant to make sweeping generalizations about their gender’s investment abilities. “I hear people say that women are better risk managers than men, but not all women are, and some men are better risk managers,” said Lynne Royer, co-portfolio manager of the Loomis Sayles Core Disciplined Alpha team, which has $7.8 billion in assets. “I don’t believe in generalizations.”

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Still, the question remains: Why are there so few female mutual fund managers, despite the relatively large numbers of women in money market funds? In part, it’s because that’s the way it has always been. “If you go to a trading desk, you’re not going to see a lot of women,” Ms. Royer said. “It’s really a cultural issue.”

Indeed, said Ms. Chandoha of Charles Schwab, it’s still a man’s world. “The industry is still male- dominated,” she said. “I was at a mutual fund industry awards dinner, and there were tables for each firm. I was looking at another table that was all men, and was wondering if a woman would be comfortable at that table, and I thought not.”

RISING UP THE RANKS

Another reason is that it takes time — often 20 years or more — to rise to the ranks of fund manager, and the industry was even tougher for women in the 1980s and 1990s. To become a manager, you have to convince people that you can produce good returns and beat a benchmark. Basically, that means managing money, something that many analysts aren’t allowed to do, and certainly weren’t allowed to do in the 1980s.

“It’s hard to move from being an analyst to being a portfolio manager,” said Susan Hirsch, manager of TIAA-CREF Large-Cap Growth Fund (TILHX). “You can’t go to school to become a portfolio manager.” Her break came because she created a model for picking small-cap growth stocks. The return from that model enabled her to move to portfolio management.

Many fund companies, including TIAA, now allow senior analysts to manage money, typically within their areas of specialties, which may offer more movement for women into portfolio management. “Some manage quite a bit of money; it’s a hybrid role,” Ms. Hirsch said.

Even so, women are not pounding at the door of the investment management field. Loomis Sayles examined candidate searches, several of which were for junior applicants. Out of 700 applications, just 18% were women. And that’s not unusual in finance: Just 16% of all those holding the Chartered Financial Analyst designation are women.

Male and female roles in society are a barrier to entry as well. Portfolio management is an intense job, and that makes it difficult to juggle career and family. “The reality is that in most American households, even if both male and female are working, more often than not, the woman is responsible for the doctor’s appointment for the kids or the repairmen at the house,” said Lara Magnusen, portfolio manager at Altegris Advisors. “Women need jobs that have flexibility.”

“If you go to a trading desk, you’re not going to see a lot of women. It’s really a cultural issue.” — Lynne Royer, co-portfolio manager of the Loomis Sayles Core Disciplined Alpha team

A TOUGH SELL

In many cases, being a portfolio manager isn’t one of those jobs, despite companies offering greater maternity leave and other perks. “You still have a kid after six months’ maternity leave,” Ms. Magnusen said. When she goes to conferences and talks to other female managers, the talk is how to get back and pick up the kids. “It dominates the conversation,” she said.

A growing number of companies are working hard to encourage women to enter portfolio management, finding that it helps a company’s culture and overall performance. Schwab, for instance, which says that 85% of its funds have a female on the investment management committee, has a women’s leadership group designed for networking within the company and encouraging women in the business.

Shannon O’Mara, associate director of credit research at Loomis Sayles, has launched the Loomis Sayles Undergraduate Women’s Investment Network (UWin), which offers internship opportunities to female undergraduates at Bentley College and the University of Massachusetts. “Our goal is to educate and attract women to our business,” she said. “We want to give them a glimpse that it’s a viable career option.”

But it’s still a tough sell. To attract more females to top management, companies need to be more flexible, Ms. Magnusen of Altegris said. “Balancing a job in finance with a family is no easy task — it’s only doable if you find the right company. I don’t think there are enough firms that are willing to offer enough flexibility.”