Why gender diversity means better outcomes for investors

Mixed-gender teams work well together because men and women think differently, something that should help practitioners build much stronger investment firms

Jul 28, 2015 @ 4:05 pm

By Leah Bennett

The investment industry has certainly gone through a period of turmoil over the past 15 years, bookmarked by the infamous dotcom bust and the potential reshaping of the eurozone. Investor confidence has been shaken, and an entire generation of millennials has virtually no faith in the equity market. In fact, a recent Goldman Sachs survey found that fewer than 20% of millennials thought the stock market was the best avenue to save for the future.

Since the financial crisis, our industry has strived for positive changes — better practices, better regulations and better transparency — all to better serve clients. One way we can make an impact is by incorporating more diverse views and thoughts into our practices. Studies show that diversity produces better outcomes for investors; this finding holds true at senior leadership throughout firms, from investment teams to senior management to the board of directors.

(More: Mutual fund industry comes up short when it comes to women portfolio managers)

Mixed-gender teams often work well together because men and women think differently, something that should be embraced and that, in practice, should help practitioners build much stronger investment firms. Research shows that female investors do a better job matching return expectations with results. Women also tend to trade less, which leads to better returns over the long term. If you combine these inherent skills with those that men possess, you can build a very solid investment team.

Studies also show that many women are often better communicators, which makes them well suited for leadership roles. Kip Tindell, CEO of the Container Store, recently stated that “women possess innate skills that cater to communication: empathy and emotional intelligence — two key pillars of conscious capitalism.” Yet, only 23 of Fortune 500 CEOs are women.

Strong communication skills and the ability to assess risk differently should also enable women to play a significant role in the global economy in the coming decade. With nearly a billion women poised to enter the global work force in the coming decade, managing women's wealth — and the ability to relate to female clients — will become more important than ever.

Research and statistics highlight the importance of managing women's wealth. Women live longer and are responsible for more household financial decisions than ever before, and there are increasingly more women in the workplace generating personal income and retirement assets. Female clients are often more relationship oriented, and thus loyalty and good communication skills are imperative (these traits are usually more important than relative returns). Often, these characteristics are also shared by female portfolio managers, so the pairing of the two is a natural fit that can lead to higher retention of clients.

If the investment industry is such a good fit for women, why don't we see more women entering the industry, and why don't we see more women in senior roles? The percentage of female CFA charterholders, a proxy for the industry, has been stagnant for several decades (around 18%). Morningstar Inc. recently published a paper showing that fewer than 2% of all mutual funds' assets are run by women — a startling figure.

(More: Advisers share ways to interact with female clients and bolster retention)

There are several reasons for this lack of participation. There seems to be a misperception that the investment industry is mired in greed and would not be a rewarding long-term career choice. Although the reality is that numerous career paths within the industry are great fits for women, we need to reach out to young women at a much earlier point and educate them about these opportunities. Statistics show that women make great analysts, CEOs, CIOs, risk management experts, portfolio managers, and wealth managers, to name a few.

As senior women in the industry, we need to “lean down and yank up” (a twist on Sheryl Sandberg's “lean in”) to recruit, mentor and sponsor more women for the industry. The generation ahead of us broke through the glass ceiling; it's up to us to bring more qualified and talented women into the industry. As Carla Harris, managing director and vice chair of Morgan Stanley, said at the recent CFA Institute Women in Investment Management Conference, “Give your power away, and empower more women.”

We must create firm cultures that encourage diversity — in gender, thought and teams. Diversity should be tied to overall firm strategy. Women are the universal diversifier, which is why this subject is such an important one to embrace and debate. The end result should ultimately benefit investors.

Leah Bennett is co-chief investment officer at South Texas Money Management.


What do you think?

View comments

Upcoming event

Nov 19


New York Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Most watched


Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.


Schwab's Jeff Kleintop: Prep for volatility given China trade uncertainties

China could be considered a developed market in five to seven years , according to Jeff Kleintop, chief global investment strategist, Charles Schwab.

Latest news & opinion

Funding for Reg BI, other SEC advice reform efforts denied in Waters amendment

House likely to approve measure that effectively kills rule package, but it faces uphill battle in Senate

Wall Street lashes out at Sanders' plan to pay off student debt with a securities trading tax

Financial pros argue that a transaction levy will hurt mom-and-pop investors along with investment houses.

GPB paid B-Ds and reps steep commissions to sell troubled private placements

GPB paid commissions of 9.3%, or $167 million altogether, on the firm's private placements.

Give us a break, active managers say

Seven portfolio managers share their outlooks for the rest of the year, generally agreeing that it's been hard for active managers to stand out.

GPB Capital reports decline in value of two biggest funds

One has dropped by 25.4% and the other by 39%, according to the company.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print