The Returns on Diversification


Even after decades of progress in the professional advancement of women, under-representation in the investment space is a problem in every global market. And the higher we look up the management ladder, the worse it gets.

A Mercer study found that while women comprise about 67% of support-level staff in the industry, and close to 50% at the professional level, that percentage slumps to a mere 15% in the executive echelons.

Other studies have found that only 7% of the partners at the top 100 global venture capital firms are women; more than 60% of the firms had no women partners at all. Across the financial industry, hiring rates remain skewed in favour of males, and the attrition figures for women at executive level and above are markedly higher than for men.

In many cases, the figures are substantially worse than in other industries, but the problem is not just internal. Women across the world are key financial decision-makers, and yet most of them feel misunderstood by investment professionals. Logically, if more women felt confident in the professional advice they received, then the industry would benefit from more customers.

The investment management business must address two critical questions: why does this still happen, and how can it prompt real change?

Recent research by CFA Institute shows that more than half of institutional investors believe having a gender-diverse investment team improves performance. Increasing the proportion of women lessens the dangers of groupthink and herding in the investment decision-making process. If diversification is the bedrock of sound investment, then it follows that there should be diversification of opinions and perspectives among those making the decisions.

The CFA Institute Women in Investment Management Initiative has successfully built global networks of female members through educational events, social gatherings, and mentoring. The impact of these initiatives is self-evident.

In China, over half of all CFA candidates are women, the highest proportion in the world. Seven of top 10 countries with the highest percentage of female representation among CFA charterholders are in Asia-Pacific. These figures represent substantial progress in a region where the presence of women in senior institutional investment roles is significantly lacking.

Gradually, the investment industry’s perspective may shift so that gender diversity is seen not as an option, but as an obligatory component for future success.

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: Getty Images

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