This content is from: Portfolio

Female Hedge Fund Managers Outperform Male Counterparts

From January 2000 through May 31, 2009, women who ran hedge funds delivered nearly double the investment performance of their male counterparts, according to Chicago-based Hedge Fund Research.

  • Frances Denmark

When it comes to investment performance, gender, it seems, does matter.

From January 2000 through May 31, 2009, women who ran hedge funds delivered nearly double the investment performance of their male counterparts. Female managers produced average annualized returns of 9 percent, versus 5.82 percent for the men, according to Chicago-based Hedge Fund Research, which tabulated the data for the New York–based National Council for Research on Women (click here to download a PDF of the report, Women In Fund Management).

It also appears that women are better in a crisis — at least the most recent one. In 2008 funds run by female managers were down just 9.6 percent, compared to a 19 percent drop for the men.

Those who study the link between gender and investment prowess say risk management is key to the success of female money managers. "It’s not that women are averse to risk," notes organizational behavior expert Judi McLean Parks, an Olin Business School professor at Washington University in St. Louis. "It’s just that they are less likely to take the big one."

Andrea Feingold, co-head of Boston-based Feingold O’Keeffe, which has $1.3 billion in distressed assets under management, concurs. "When dealing with things like distressed securities, liquidity risk is paramount," she says. "It’s a hidden risk, and when it surfaces it can be crushing. Rather than looking at it as a limiting factor, we look at it as integrated into the investment process." The firm’s distressed-loan fund was down just 6.5 percent in 2008.

The performance stats won’t change the gender balance overnight, but they do bolster arguments by those who say that Wall Street as a whole could stand an extra shot of estrogen. "This is the road map to financial stability overall," contends Jacquelyn Zehner, the first woman trader to be made a partner at Goldman, Sachs & Co. (in 1996). Indeed, research has shown that women’s work habits can pay off. "Women tend to be the people who reach across boundaries; they are better at team building," says Theresa Welbourne, a research professor at the University of Southern California’s Center for Effective Organizations at the Marshall School of Business.

Superior returns aside, Zehner, a former board member of the NCRW, asserts, "I firmly believe if we had more women in financial management, we might not have experienced such a severe financial crisis."