Across industries, mothers bear the burden of household labor and childcare, a trend that translates into weaker performance at work compared to their male counterparts and other women without children. For mothers in the hedge fund industry, the Covid-19 pandemic exacerbated these disparities.
According to new academic research, on average, female managers with young children — aged 12 and younger — missed a 7 percent excess return compared to male-only funds during the months of pandemic-related school closures. This cost increased with the proportion of mothers in a firm. In contrast, fund performance was not significantly affected for managers who are fathers or women without children.
In normal times or even during events of financial crises, the performance gap for mothers didn’t exist, the report said.
“You can plan ahead,” said Olga Kolokolova, an associate professor at the University of Manchester and a co-author of the study, in a phone call with Institutional Investor. “It's really this unexpected shock, which suddenly put all the pressure on mothers to do all the childcare and homeschooling.”
In September 2008, when Lehman Brothers went into bankruptcy and sent shockwaves across Wall Street, hedge fund managers who were mothers showed no signs of underperformance compared to male managers or female managers without children. The researchers used the Lehman Brothers bankruptcy as a test period to rule out other theories of underperformance among women during crises.
“This result indicates that female managers do not react any differently from male managers on unexpected market shocks,” the report said.
Researchers studying gender disparities in the global economy found that some women managers with children exhibited stronger performance during the GFC, a phenomenon Kolokolova attributed to the cohort's increased awareness of risk. Furthermore, previous research has found that managerial and overall fund performance can decrease when a fund manager is going through a difficult time in their personal lives, regardless of their gender.
Hedge funds provide good data for such evaluations, according to the researchers of this report: Individual teams and managers are often credited for overall fund performance and hedge funds report quarterly earnings which allows researchers to measure performance during crises.
Kolokolova and her co-authors Sara Ain Tommar, an assistant professor at the NEOMA Business School in France, and Roberto Mura, a professor at the University of Manchester, analyzed results for 507 hedge managers, including female managers whose children had an average age of 11.78 years. They found the presence of one parent in a team of three managers led to a 1.71 percent loss in abnormal returns during the months of unexpected school closures; the loss increased to about 7.7 percent with the presence of one mother in a team. The effect on fathers during the “shock” months was “not statistically significant,” the report said.
“It's really important to have a diverse set of talent to earn high returns in the financial sector,” Kolokolova said of the risks of this disparity.
“This is a reason for concern as working — and prospect — mothers may continue to be less favored by employers who would, in equilibrium, adjust to the maternity risk of working women by either optimally allocating women to less ‘exposed’ jobs, or mitigate this risk by disfavoring equally-skilled women,” the reported said. “One important and direct implication is the challenges that such underlying adjustment behaviors will continue to pose to gender equity policy making,” it added.
The researchers took it a step further: In a team of three hedge fund managers with one mother who had a child under age 12, teams experienced an average loss of 11.16 percent during the month of unexpected school closures because the “time and effort associated with childcare is substantially higher for younger children.” Age 12, on average and across cultures, was considered the youngest age of parental independence. During regularly scheduled school breaks, fund performance was not impacted for female managers with young children.
“It’s about awareness of the fact that a lot of these measures hit the population very differently,” said Mura.
“Because of this, they will lose the mothers. They will lose half of the population in the financial industry, which will lead to a decrease of returns in the long term,” said Kolokolova in regard to the findings.