Funds management has a women problem

Women make up just over half of Australia's population, but you wouldn't know that if you interacted with the investment management industry. The explanation is simple. Funds management is dominated by men.

How lousy is the industry's record? Ahead of International Women's Day on 8 March, we analysed the top ranks of Australian retail unlisted managed funds under Morningstar analyst coverage.

The Morningstar database of Australian-domiciled funds under coverage contains "manager" name data for approximately 540 people identified as portfolio managers. All funds self-report, however, and while some list only the "lead portfolio manager", others list several managers, which may extend to staff classed as "research analysts".

Of these 540 identified as "portfolio managers", there are 46 women – or less than 10 per cent – under this title, overseeing investors’ capital in a lead or co-lead capacity.

That number falls to 15 if you manually exclude women who are overseeing Australian-domiciled funds – those that regulated and taxed here – but work offshore, and those who are not identified as holding a lead or co-lead role within the fund.

In the Australian equity category, women feature as onshore lead or co-lead portfolio managers in funds from Tribeca Investment Partners, Fidelity International, Airlie Funds Management, Acadian Asset Management, Realindex Investments and Colonial First State.

On the fixed income side, Pendal Group and Dimensional Fund Advisors funds also count women among their manager ranks. Within broader asset classes, funds from MLC, AMP Capital, Advance International and FirstChoice Investments feature women.

But none of the firms listed are anywhere close to equal representation. One firm, for example, reported 19 portfolio managers across their 24 funds under Morningstar coverage. Two of them are women.

Kate Howitt (left) has sole responsibility for the Fidelity Australian Opportunities Fund.

Australia is not an isolated case. A global study of over 26,000 fund managers across 56 countries, conducted by Morningstar in 2015, revealed that women have not made sizeable gains in managing the world's mutual (or managed) funds. Researchers also found the rate of women fund managers is lower than the rate of women in other professions with similar education requirements, such as doctors and lawyers. Globally, about one in five fund managers is a woman.

The figures are also not a surprise. A Mercer study conducted in 2017 of diversity in the Australian investment management industry, co-developed with 15 asset owners and managers, showed 76 per cent of investment managers are male, and 48 per cent are private school educated.

Fund managers by gender

It takes some digging to unearth the numbers. Morningstar surveys approximately 450 flagship Australian-domiciled retail funds under coverage and asks them to voluntarily self-report the names of their portfolio managers.

For this article, we collected all the open-end retail funds under coverage (excluding ETFs) for which portfolio manager names are attached. This left a list of around 383 funds. Morningstar researchers identified each manager's gender by examining their first names; this was followed by manual verification where managers names were gender-neutral.

The data however does not distinguish between whether someone is a lead or co-lead portfolio manager or a support manager. Nor does it make clear the location of the manager. For example, Flavia Cheong is listed on the management team of the Aberdeen Standard Asian Opportunities Fund (which is available to Australian investors) but works in Singapore, according to her LinkedIn profile.

The Morningstar manager research team pored over the list to reduce it to 15 female lead or co-lead female manager in Australian-domiciled unlisted retail funds who work in Australia. Lead portfolio managers are responsible for creating and managing investment allocations for clients.

The final list is not without problems. Several high-profile female portfolio managers are not listed as they do not oversee funds under Morningstar coverage. Sarah Shaw at 4D Infrastructure and Nikki Thomas at Alphinity Investment Management come to mind. The Morningstar coverage list was relied upon as it is the most complete set of data. Australian investment managers don't make the composition of their investment teams readily available to the public. Nor is Anne Anderson from UBS listed. This is because while she oversees a fund under Morningstar coverage, the firm has not listed her as a portfolio manager. Each fund also has its own hierarchy. Magellan Financial Group's Vihari Ross is a key decision-maker but because of her title, "head of research", she is excluded.

Misperceptions about women and funds management

The list of reasons why women aren't making it to the top ranks in the funds management industry is wide-ranging. Several factors work against potential candidates, from education and hiring, to career progression and opportunity.

According to Kate Howitt, lead portfolio manager for the Fidelity Australian Opportunities Fund, the problem starts from an early age because of misperceptions and stereotyping about what a career in funds management is.

"I think there's an issue with the pipeline," Howitt says. "At my son's school, when they have career events around financial markets, they'll have to run two sessions because they get so many boys. At my daughter's school, they'll have two top students show up.

"Finance offers an incredibly broad and diverse range of careers and I think it's very hard to understand until you get close to the industry. I've probably only ever met a handful of women in finance who knew from an early age that they wanted to go into finance. It's easy to look at things like The Wolf of Wall Street and say ‘oh that's what finance is all about. Greedy individuals with the will to dominate’."

Anne Anderson brings more than 30 years of experience to UBS as head of fixed income and investment solutions.

A 2019 Australian government report showed women are underrepresented in STEM education and careers - science, technology, engineering and mathematics. Women from minority groups are particularly underrepresented.

The report argues that gender inequity not only limits the available talent – but is also bad for business.

"Gender diverse companies are 15 per cent more likely to financially outperform their counterparts," the report says, citing findings from a 2015 McKinsey & Company study.

The small number of women present in the industry makes it difficult to draw conclusions about the performance of funds led by women.

But Howitt says in her experience, inequity can affect investment performance.
"From a client perspective, you're more likely to get better outcomes if you have a broader range of perspectives and input," she says.

Once women make it into the low levels of funds management, advancement is not guaranteed. Xing Zhang, who is responsible for the Female Leaders Fund at Acorn Capital, says women in boutique investment managers have it particularly tough and that progression into senior levels is unlikely.

"Within the smaller firms there are really only two levels – analyst and portfolio manager," Zhang says. "Often the portfolio managers will have been in the industry for decades and there just aren't new roles available. Unless one of the portfolio managers leaves, there is minimal career progression for women in junior roles, who eventually leave the firm."
Zhang says this situation has worsened, particularly as fees fall and the industry contracts.

Work-life balance

Work-life balance is also an issue facing women in the industry. Zhang says many of those who succeed in the industry do so because they have the support at home.

"In [Australia], women don't have the support system behind them to manage a full-time career and a family," she says, citing her own experience working in Asia, where childcare services are more readily available.

"Many women who do succeed have either taken on the role of primary breadwinner in the family with their husbands supporting them or have nannies to help them at home."
Howitt says the role of a portfolio manager is particularly demanding, for both men and women.

"[Portfolio management] is inherently a full-time role," she says. "It can be structured to be part-time, but it's much harder. It's hard to take a holiday because you can put in your annual leave request, but the markets are still open, and your stocks are still moving and you're still accountable for the performance."

Change is happening, however, in certain corners of the industry. Superannuation is one area Zhang calls out, as large funds have the capacity to take on new staff and work at the recruitment level to encourage diversity.

Vihari Ross is head of research at Magellan Asset Management and a member of Magellan’s Investment Committee.

UniSuper is for example championing the next generation of female leaders in investment management, working at a university level to raise awareness and encourage more women to enter the industry. Zhang says super funds are also working to ensure best practice in ESG – environment, social and governance - to differentiate themselves and engage members.

Sustainable investing is also an area where Zhang is seeing more women emerge – it’s an area she's excited about as the specialisation moves from a compliance check to a part of the investment process.

Morningstar's 2015 confirms this, finding that socially responsible funds are more likely to be managed by women.

The Moneyball moment

Zhang is also working herself to challenge the status quo. Together with Anne Kuleshova, a consultant at investment consultant firm JANA, Zhang runs a Melbourne-based organisation Women in Investments (formerly 3TOM) to inspire more women to enter and stay in funds management.

"Melbourne is a big boys club – socialising outside work, building relationships, making deals," she says.

"For women, especially those who have families, their focus shifts outside of work hours to family. Our organisation helps women build meaningful relationships, collaborate in a safe environment, and talk about the issues facing them, whether work life or personal."

Women in Investments reaches around 250 women across the investment management industry.

Howitt believes the industry must go through what she calls a “Moneyball moment’, referring to Michael Lewis’s bestselling book – and subsequent film – in which baseball players are chosen not because of a coach's "gut feel" but because they have consistent batting stats.

"Fidelity has had higher female representation and I put a lot of that down to the fact that we have decades of metrics quantitative metrics," she says. "We have a large pool of analysts around the world and we can watch the performance and qualitatively see who is doing well as an analyst and move them towards a portfolio manager role.

"If you're in a smaller shop, then you don't have that pool of data, and inevitably you're relying on more qualitative assessments of who seems like a good portfolio manager. As with lots of things, women can do the job well, but they might do it in a way that looks and feels a bit different to the way men do it."

Howitt also calls on the industry to do a better job of articulating their value to society.
"We solve people's problems by matching people and entities who have excess funds and need a return, and people who don't have the funds but can give a return," she says. "The finance industry connects all those parties efficiently.

"The job is fundamentally about problem-solving and helping people. And yet that is not the perception of the profession."