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Women Move Up in Finance But the Gender Gap Is Large

An Institutional Investor Sponsored Report on Women in Leadership

Whether or not enough women are leading today’s financial institutions is a difficult question to answer. Often, it depends on whom you ask. One thing is certain: To be successful in finance, historically a male-dominated field, requires not only perseverance—but overcoming gender-based hurdles.

Gender diversity has come a long way during the past several decades. Women today run hedge funds, mutual funds, and investment firms. They are executive officers at global institutions such as Fidelity, Barclays, JPMorgan Asset Management, and Goldman Sachs. In all, women represent 60 percent of all financial services employees, according to PricewaterhouseCoopers’ 2013 Mending the Gender Gap report. Yet data from the report also shows a sobering trend: Only 14 percent of executive officer positions are held by women and only 16.6 percent of board seats are held by women, a figure that has remained flat for seven years. This trend isn’t limited to the United States, either. Among European Union member nations, the number of women serving as board members has risen by less than one percent per year over the past decade.

But women also play a key role in financial life at the family level.

“In terms of financial services users, particularly on the consumer side, increasingly women are the decision-makers in some countries around the world,” says Citibank CEO Barbara Desoer.  “A vast majority of the financial decision-makers are at the household level.  And as a result, they’re very important customers.  So a woman in business who can relate to those customers and the kinds of tradeoffs and challenges and decision-making processes they’re facing--whether it’s consumer, or a small business, or a large corporate situation--is extremely valuable.”

Advancement of Women Still Lags

Although women are hired by investment banks, funds, or asset managers at about the same rate as men, they often fail to keep pace when it comes to advancement. A key reason, says Maureen Adolf, president of the Financial Women’s Association, is that women continue to face challenges associated with balancing work and family.   Adolf says that inequalities aren’t limited to investment banking, but can be found in high-pressure areas such as trading and hedge funds as well as credit intermediation and insurance. For example, women make up 54 percent of all funds and trust employees, but only 26 percent serve in executive-level positions.  The numbers are far worse in the securities industry, where women make up just 18 percent of executive officer roles. 

Overcoming the Problem: New Themes Emerging

In the face of gender-based and cultural diversity challenges, two new trends are emerging. Companies are recognizing that they can no longer ignore the fact that women control a significant portion of the global consumer discretionary spending and investable assets.  According to a 2014 study prepared by the New York-based Center for Talent Innovation, sponsored by Deutsche Bank, Goldman Sachs and four other multinational banks, women control $20 trillion of the world’s wealth—about 27 percent of the global total.  In the US alone, this research shows women have decision-making control over $11.2 trillion. The implication is that pure bias prevents women from having a bigger role in setting global financial policies.

“Often times, bias may be unintentional, whether it involves pay inequality or career development hurdles,” says Adolf. Another factor may be the lack of clarity as to what criteria may constitute leadership. FWA helps women overcome this by providing development opportunities outside the work place, such as a chance to chair one of the organization’s committees, lead an event, or network with other women on overseas business trips.

The organization, which is 60 years old and has 800 members, also provides mentoring for women at the high school and college levels and funds financial literacy programs that can help women achieve successful careers in finance. 

Gaining Ground in Hedge Funds

According to data from consultancy Rothstein Kass, hedge funds run by women returned 9.8 percent in 2013—compared to the 6.72 percent return of the HFRX Global Hedge Fund Index, which broadly represents the male-dominated hedge fund universe. Perhaps more telling is the fact that from the period following the financial crisis through 2013, hedge funds run by women earned an average return of six percent, compared to the Standard and Poor’s Index, which rose 4.2 percent.  The key reason behind this, some believe, is that women view risk differently and have a long-term perspective. As a result, they are less likely than men to trade frequently and less apt to sell at lows. 

Desoer adds, “In leadership positions of those companies in the finance or treasury areas, we have certainly experienced a growth of more diversity in those roles over time. Here at Citi, through our ‘Citi Women’ program and a volunteer organization of which I am co-chair, we have two bodies of work. One is focused on accelerated development of women who are Citi employees. And then we have some subcommittees that are very much focused on clients and looking at opportunities for how we can develop, particularly on the institutional side, products that are more targeted
to women.”

Sandra Poe, a partner at Reed Smith and board chair of High Water Women, a group of senior women from the hedge fund and investment communities, says that women are perfectly suited for these careers. “With trading at a fund, you have the ideal work-life balance, where you can go home when the trading day ends,” she says.  She says that women who manage money within a large investment firm can be especially successful since they are paid based on performance. “It’s hard to argue with numbers,” she says, thereby removing any inherent pay imbalance. “Trading profits are trading profits and are based on hard dollar numbers,” she says.  While women can achieve success as money managers, getting them onto this career path and into the right educational programs remains challenging, she says.

Poe believes that impact investing will continue to represent a potential opportunity for women to achieve success in finance.  Pension funds, foundations, and other investors continue to seek fund managers that promote ethical and value-based investing. Women may be more likely to respond to a foundation whose core values prohibit it from investing in tobacco products or carbon-based fuels, for example.  She believes that colleges and universities may represent another vehicle with which the pool of women fund managers continues
to increase.

So where are we on the journey toward a successful integration of women into financial leadership?

Citi’s Desoer says, “I think we’re still early, and, again, there’s variation. The high side variation makes me very optimistic because there are places where there is better performance. Someone shared a statistic with me that in China 51 percent of senior managers in some sections of China are women.  I think that’s a great indication of change that can come out of an emerging market like that.  This can help accelerate lessons learned from more traditional economies or established economics.  So I am optimistic, but it is a journey.”


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