‘RUNNING MONEY SUITS WOMEN’ WHAT DO WOMEN WANT? TO BEAT PEERS

When Leah Zell signed on at Lehman Brothers in 1979 she joined a fraternity that, like most of its peers, boasted not a single female partner. Ms. Zell, a Harvard Ph.D. in history, was the only woman hired that year by Lehman’s corporate finance group, but she soon gravitated toward money management.

“Running money suits women for a lot of reasons,” says Ms. Zell, manager of the $1.7 billion Acorn International Fund in Chicago.

Communication and marketing skills — where, Ms. Zell believes, women trump men — are crucial. Membership in the old boys’ network, still so essential to the deal-making side of the business, is not.

Ms. Zell’s sentiments aren’t unique. Money management is widely considered a bastion of meritocracy in a not-so-level financial industry playing field where, according to a recent study, nearly two-thirds of women say the glass ceiling remains firmly in place.

Just last week, for example, some 900 women who worked as brokers at Merrill Lynch & Co. Inc. beween 1994 and last June joined in a class-action mediation against the nation’s biggest brokerage. The number of complainants was three or four times what had been expected. And their complaints mostly involve superiors giving leads, clients and business to male brokers rather than to them and could result in millions of dollars in settlements. (Says a company spokesman: “We have no tolerance for discrimination of any kind.”)

The glass-ceiling study, released last month by the Financial Women’s Association in New York, also found that 54% of women surveyed feel they had made no progress in equal pay over the past several years.

But most women feel the picture is somewhat brighter in mutual fund management, where portfolio managers wear their returns on their sleeves. Those who make money for investors swim; those who don’t, sink.

“There is an objective measurement of performance — i.e., the screen is sex blind,” says Ms. Zell. “You either pick good stocks that go up or bad stocks that go down. Nobody asks what your sex is at the end of the day.”

While women may fare better in money management than in other, more macho Wall Street corridors — and while the overall picture has certainly improved since Ms. Zell started — they’ve still got a long way to go.

Indeed, progress seems to have slowed in recent years.

In 1993 just 2.9%, or 122, of 4,078 mutual funds tracked by Morningstar Inc. were managed solely by women. In 1995 the percentage surged to 6.4%, or 430 out of 6,695 funds. But by 1998 the percentage dipped to just 5.7%, or 591 out of 10,289 funds. (Funds managed include share classes.)

Moreover, much of that growth was attributable to women already in the business managing more funds, rather than new players breaking in.

In 1993, Morningstar had 122 female fund managers in its database. By 1995, the number had jumped to 172. But three years later Morningstar recorded an increase of just six women, to a total of 178.

‘still hard to get in’

“It’s still hard to get in,” says Patricia Falkowski, who recently resigned as president of Fiduciary Management Associates Inc. to head Chicago Trust Co.’s $7.35 billion small-cap portfolio — including a start-up $32 million mutual fund.

“The network doesn’t exactly open up with open arms. You still have to chisel away at it,” says Ms. Falkowski, adding that “I don’t bump into (women) peers all that often.”

It is, as Ms. Zell says, a matter of being the red flower in a field of white. “You get noticed. That’s good. Obviously, there’s a higher risk that comes with that.”

Adds Mary-Kay Bourbulas, manager of the $665 million Strong High Yield Municipal Bond Fund: “It’s good and bad. As a woman, maybe you’ll get a shot that a man wouldn’t. But your rope is awfully short.”

Not surprisingly, many successful women fund managers find ways to make that shot count — sometimes aided by, well, not being a man.

Elizabeth Bramwell, who oversees $745 million at Bramwell Capital Management, says getting rid of some of the testosterone in a room often makes for a better interview. “You neutralize that male-on-male competition thing.”

International manager Ms. Zell agrees: “You get a precious hour with the CEO of a company and what you want is for him — and it almost always is a him — to tell you things he may not usually say. If you are female and foreign, he is often less guarded. That natural defense mechanism is down a bit.”

Meanwhile, women managers have grown used to keeping up their own defense mechanisms. Ms. Zell recalls a business trip to Mexico during which she and a female colleague checked in to the best hotel in Mexico City. Five minutes later, they both came back to the desk, each convinced she had been given the worst room in the hotel.

“When that kind of thing happens, you have to say, ‘Wait a minute here. This is unacceptable.’ ”

As were some cheesy comments thrown at Elizabeth Dater, manager of Warburg Pincus’s $2 billion flagship Emerging Growth Fund, early in her career. On one memorable company visit, her arrival was greeted by a sarcastic offer to light the candles and turn on the music. She just smiled.

“Early on, a lot of people probably thought I had three heads,” says the 30-year industry veteran. “A sense of humor has been a sustaining strength here.”

Wells Fargo & Co.’s Kate Schapiro, co-manager of the $65 million Stagecoach International Equity Fund, recalls one startling interview with “an older gentleman” for a job that involved working closely with a male fund manager.

“He wanted to know about business trips,” she says. “How we could go on them together, and what the hotel arrangements would be, and what would his wife say… You have to laugh.”

Fortunately, such faux pas — funny or not — are a lot less common than they used to be. So is the kind of gender-conscious hiring that prevailed in the money management industry until fairly recently, says Michael Castine, partner at Highland Search Group LLC.

Ten years ago, it wasn’t unusual for a fund firm to direct Mr. Castine to make hiring a woman a search priority. ” ‘We need more women.’ I heard it all the time.” But he also came across plenty of “No women need apply” signs. “There were certain old-school types who wanted to keep things the way they were. You know: the old boys’ network.”

Today, he says, that’s changed. Employers don’t snub women, but they don’t seek them out either. “Performance is the bottom line,” says Mr. Castine.

Financial planner Elaine Bedel of Bedel Financial Consulting in Indianapolis, agrees. Like many of her female peers, she supports women in the industry but says she doesn’t make business decisions based on gender.

“It’s not really something we make a big deal out of,” Ms. Bedel says. “But I am always pleased to find a woman running a good fund.” Still, while performance is a must, other factors do come into play in hiring and, presumably, investment decisions. Mr. Castine cites intellectual ability and, a close No. 3, marketing skills.

“Ideally, (the manager) will have the type of personality that sells to clients.”

That favors women, who tend to be better than men at sales, right? “I won’t touch that one,” says Mr. Castine.

Though some female fund managers insist there are no gender-related traits or temperaments, many agree that their sex is generally more intuitive, more detail-oriented and better at communicating than the opposite one.

“Women tend to be more skeptical, to look at more nuances in making a decision,” says Ms. Bramwell. “I’d call it a sixth-sense thing.”

Ms. Dater says the female factor is an “innate intelligence and intuitiveness. . .Women tend to show a great deal of attention to detail, there’s this enormous sense of obligation to our clients that I’m not sure men feel.”

Stagecoach’s Ms. Schapiro and her co-manager, Stacey Ho, go even further.

“We call it (the fund) our baby,” says Ms. Ho, who’s only half kidding. “There is this nurturing aspect to the way we see our fund. We take care of it, make sure its not getting into trouble.”

Ms. Bramwell also notes that women “tend not to be the most aggressive risk takers with their own money. . . .Women, historically, are more cautious investors.”

That’s true — and not a bad thing — according to a recent study by economists at the Graduate School of Management at the University of California at Davis.

Women trade less, and as a result, tend to earn higher returns than men, the study found. On a risk-adjusted basis, men, who trade 45% more than women, earn 1.4 percentage points less annually than women do.

Of course that’s just plain folks. There’s no comparable data for professional investors.

Yet women fund managers admittedly share many of the more traditional “male” characteristics — such as confidence and aggressiveness — that may account for higher trading frequency by men found by the study, and therefore may trade every bit as excessively as men.

As a matter of fact, female fund managers sometime outperform men, and sometimes underperform them.

Female domestic equity managers, for example, tend to beat their male peers, according to Morningstar data. In 1993, their average return was 16.38% versus a category average of 13.66%. In 1995, female managers’ average return was 30.99%, compared with a category average of 30.02% In 1998, female domestic equity fund managers posted an average return of 14.50%, against a category average of 13.50%.

Female international equity managers didn’t fare as well. In 1993, they returned 44.69% against a category average of 43.26%. But in 1995 their returns skidded to 1.81%, vs. the category average of 8.40%. In 1998 female international managers posted an average return of minus 3.63%, compared with a category average of 3.67%.

emerging market specialists

Perhaps that’s because women seem to cluster in emerging market funds, which have suffered lately, while male international managers may run more Eurocentric or global funds that have been buoyed by European and U.S. stock market returns.

Women managers also seem to turn up a lot in small-cap funds, and not as often at the helm of the large-cap growth funds that have been the bread and butter of this bull market.

One theory: Undercovered small-cap companies and brand-new international markets were where many of the openings were when the women were breaking into the business in the late 1970s and early 1980s.

Another: Female managers are still to some extent marginalized in an industry that, after all, worships the nostril-flared, raging bull. Ever hear a broker call himself cowish?