It’s no secret that when it comes to investing, women have several key advantages over their male counterparts — both at home and on Wall Street.
In her new book, “Women of the Street: Why Female Money Managers Generate Higher Returns (and How You Can Too)," renowned hedge fund researcher Meredith Jones decided to combine her own research with existing studies and insights from top female investors to pinpoint exactly what it is about women that gives them an edge.
Her hope is that by shining a light on data that champions the strengths that women have as investors, it will help level the playing field. There's still a glaring imbalance between female and male leadership roles in the investment business — less than 20% of executive level positions at hedge funds are filled by women. Women are even scarcer at venture-capital and private-equity firms, where they make up 13% and 12% of C-level positions, respectively, according to Jones. (It’s worth noting that less than one-quarter of certified financial planners are women, a rate that has barely budged in the last decade.)
Yet in Jones’ 2013 study, “Women in Alternative Investments: A Marathon, Not a Sprint,” she found women-led hedge funds outperformed the HFRX Global Hedge Fund Index (6.1% vs. a decline of 1.1% for the period beginning January 2007 and ending June 2012). Her findings have been echoed in other reports.
“The truth is, diversity investment research challenges the way things have always been done,” she writes. “Discussions like this are disruptive, and while we’ve clearly gotten used to disruptive innovation when talking about rideshares or Airbnb's, it isn’t as comfortable when we’re talking about the cognitive and behavioral characteristics of human capital.”
The answer to improving diversity in the finance space is threefold, says Jones: encouraging institutional investors to invest more in women-owned firms; teaching the value of employing a diverse group of money managers to old-hat investors; and urging more women to enter a traditionally male-dominated field.
There are some positive signs of progress already. Last year, sustainable investment firm Pax World Management rolled out an index fund that invests in companies that have higher ratios of women in senior management. And institutional investors pumped $850 million into minority- and women-owned hedge fund portfolios in 2014.
“One of the things I think that is really going to drive more women into wanting to become professional investors is that there is more [investment] capital allocated to women right now,” Jones says. “Part of it is getting this data out there that says the way that [women] trade is not just OK but may actually help [investors] in in the long run.”
Follow Mandi Woodruff on Facebook >
Read More:
3 reasons money isn't making you happier
