At Institutional Investor’s and CNBC’s Delivering Alpha conference, Systematica Investments CEO Leda Braga observed that when she started working at London hedge fund BlueCrest Capital Management, she “was 34 weeks pregnant,” as Institutional Investor’s International Editor Tom Buerkle tweeted.
Leda Braga is one tough cookie. "I started at BlueCrest when I was 34 weeks pregnant." #DeliveringAlpha— Tom Buerkle (@tombuerkle) July 15, 2015
Braga also said that rumor had it that when BlueCrest managers interviewed her, they failed to notice her pregnancy — an anecdote that illustrates the obliviousness of some quants. But her story caught my attention for another reason. When Braga launched her firm earlier this year, London-based Systematica became one of the rare hedge funds run by a woman.
A 2009 study by New York–based not-for-profit National Council for Research on Women, now called Re:Gender, found that women-led hedge fund firms made up only 3 percent of managers. The number of women investment professionals in hedge funds is similarly tiny. The male-female imbalance persists despite the fact that hedge funds often claim to be meritocracies.
The observation that the hedge fund industry lacks gender diversity is hardly new. My colleague Fran Denmark wrote a feature on women hedge fund investors before the financial crisis. Recently, as the issue of women in the workplace has become a popular topic, the hedge fund industry’s lack of women has come up more often.
As I was researching this year’s Hedge Fund Rising Stars, our annual list of 30 hedge fund up-and-comers, I hunted for eligible female portfolio managers, but the effort was disheartening. In what is a very tough hedge fund start-up environment, Systematica was one of the few hedge fund firms, if not the only one, launched in the past 18 months with a woman in charge.
I wanted to find the reasons for this and explore some solutions, so I reached out to some influential women. Among them: Afsaneh Beschloss, CEO of Washington-based fund of funds Rock Creek Group; Nadine Terman, CEO of San Francisco hedge fund firm Solstein Capital; and Katherine Chan, a partner at the New York’s Anandar Capital Management. These three come from different backgrounds and are at different points in their careers. All three are respected, successful and have made it a point to further the cause of women in alternative investing.
We’ve produced a video of these three discussing these issues. Parts 1 and 2 of a three-part series are already on the Institutional Investor web site. You can watch them, here and here. The third installment, which examines what needs to be done to address gender imbalance, will run next week.
My conversations pointed to five areas that need to be addressed: education, culture, mentorship and hiring, workplace flexibility and access to capital. Let me run through them.
The most important. High-school girls and college women need to learn finance and be encouraged to see investment management as a viable career option.
I attended an all-girls school in Bristol, U.K., where academics were highly prized, and we were told we could be anything we wanted. But I didn’t even know the asset management industry existed until after graduating from college. And even my classmates who excelled at math and science never talked about Wall Street or investing. A sensible ambition for girls in those years was medicine or the law. (I did, by chance, learn of a young woman who graduated a few years after me who is working at a London hedge fund firm.) In college we used to laugh at people studying computer science, which is even more embarrassing since I studied at the University of California, Berkeley, for a year.
A friend, Seema Hingorani, a former chief investment officer of the New York City pension system, is addressing the problem of getting girls interested in finance through a not-for-profit, Girls Who Invest, that she founded. Inspired by Girls Who Code, which seeks to introduce girls to computers and programming, the organization aims to familiarize high school and college women with finance and hedge funds. This effort needs to go farther; all liberal arts majors should learn investing basics.
I always thought the locker room culture of the trading floor was one reason you didn’t see more women traders and portfolio managers. But that’s not the feedback I’ve gotten from women hedge fund managers, especially younger ones. They did not feel uncomfortable, they said.
Early in my journalism career, I covered financial advisers. In those years the industry was hit by sexual harassment and discrimination cases at various brokerage offices. These were depressing stories, and what I realized was that these branches were fiefdoms in which men held power with little oversight, particularly when it came to gender discrimination. In the decade since the so-called Boom-Boom Room cases were resolved, financial services have made strides in the fair treatment of women employees. As mostly small, privately run businesses, hedge fund firms could have turned out the same way as those brokerage offices — particularly since the stakes, and profit potential, are much higher. That they didn’t is a testament to progress. But greater efforts need to be made to recruit and retain talented women.
Mentorship and Hiring
Although it’s true that Wall Street is making an effort to hire more women, hedge funds and private equity firms clearly need to do a better job. I discussed this with Beschloss and Katie Hall, founder, CEO and co-CIO of San Francisco–based outsourced CIO firm Hall Capital Partners. Both stressed the need for managers to hire people who are different from themselves by gender, race, financial background and education. They argue that diversity of experience leads to diversity of thinking and produces smarter decisions, better-run firms and wiser investment decisions.
Yet the fact remains that representation of women among hedge fund firms and private equity firms is significantly below 50 percent. A Bloomberg study of women in the top ranks of private equity found that at the largest firms, women account for only 11 percent of senior management. Public pension plans can play a transformative role since they request diversity statistics when they hire managers; they can make those data public and push for change. This strategy would be far more effective than pressing managers to boost diversity, as New York City Comptroller Scott Stringer has said the Big Apple’s pension funds will now do.
Once women are hired, they benefit from mentors, who can guide them along a career path. Asset management has long been a believer in mentorship. Organizations like 100 Women in Hedge Funds seek to help women advance, but many of the women I’ve talked to across the hedge fund ecosystem feel that more needs to be done to foster mentorship and collaboration.
This was a key takeaway from the Women in Hedge Funds video series. Anandar’s Chan makes the point well in our third video, saying that the industry needs more systems, like flexible work hours and accessible child care, to keep women in the workforce. If more men were primary caregivers, these structures would already exist. It may be late to make that change, but it can be done if firms want to.
Hedge fund manager Paul Tudor Jones II took some heat last year when he suggested that the 24-hour nature of the markets does not lend itself favorably to women who have babies. But Beschloss says she knows many women who, when their children were young, liked to trade, say, the Japanese markets, which are 13 hours ahead of New York, because being up at night fit their schedule. Her experience suggests that with the right structures, hedge funds might be a fantastic industry for families. If Third Point’s Daniel Loeb can trade from the Hamptons, why can’t a mother trade at night from home?
Access to Capital
For Solstein Capital’s Terman, this is crucial. Women today control 1 percent of overall hedge fund capital. The main thing that will move the needle, she says, is getting more money into their hands, both at established and new firms. To help facilitate this, Terman has run her own conference, together with 100 Women in Hedge Funds, in San Francisco for the past two years, bringing together women hedge fund managers with potential allocators.
The hedge fund gender gap is often dismissed as a rich person’s problem. In a two-income family, in which one or both are earning more than $1 million a year, one is likely to drop out of the workforce for a time, most likely to take care of children. That person is probably going to be the woman. For poor and lower-middle-class women, that’s not an option. The affluent and well educated have the luxury of choice, and Wall Street has clung far longer than most professions to the white picket fence notion of family. There is also a case to be made that the world does not need more hedge fund managers, and that women should go into other investing areas, business or politics. There is one overwhelming reason, however, why the lack of women on the investing front line matters: money.
Especially in the U.S., hedge fund management has been one of the greatest wealth creators of the past decade — probably behind only tech (also not known for its diversity). Yet women have disproportionately not participated. A woman has never appeared on Alpha’s annual Rich List. After Systematica’s Braga, the most successful woman in an investment management role (and I stress “investment,” because that is the most profitable and powerful job at a firm) may be Anne Dinning of New York’s D.E. Shaw & Co. Dinning herself dropped out for a number of years before returning to Shaw and eventually becoming one of the firm’s four-person management team.
As for the quants, obliviousness may be the next best thing to gender neutrality. But not noticing is no way to make real progress.