Diversity in Investing:

Author:

Valerie Jones
Marketing, Confluence

The asset management industry, a cornerstone of global finance, has long been criticized for its glaring gender disparity. Despite numerous diversity initiatives, women remain significantly underrepresented in leadership roles, raising questions about the industry's commitment to genuine inclusivity.

Stagnant Representation

The share of female fund managers in its global database inched up to 12.5% in 2024. A 2023 Mercer analysis found that women constituted only about 13.7% of key decision-makers in asset management globally. An extensive analysis across 29 markets found that women fill a global median of just 9% of CIO roles. According to Girls Who Invest, only 1% of US financial assets are managed by women or individuals from diverse backgrounds. These percentages have increased only marginally from earlier years, reflecting a long-term trend of stagnation highlighting the persistent underrepresentation of women in asset management roles worldwide.

Figure 1: Representation of Women in Asset Management.
Source: Citywire, Mercer, Alpha Architect, Girls Who Invest, The Times.

Real Business Consequences

The underrepresentation of women isn't just an equity issue—it may have business consequences. Studies have shown that gender-diverse teams can enhance investment performance. Research indicates that diverse teams deliver superior returns by arbitraging more stock anomalies, avoiding behavioral biases, and minimizing downside risks. Additionally, a study by the CFA Institute found that more diverse teams can yield better results and create meaningful impact when managed inclusively.

Goldman Sachs analyzed 496 large-cap U.S. equity mutual funds, collectively managing approximately $2.3 trillion in assets, to compare the performance of funds where women held at least one-third of the portfolio management positions against those managed exclusively by men. The study found that all-women and mixed-gender US fund teams outperformed all-male portfolio management teams.

Another 2021 study conducted by Goldman Sachs found that 48% of female-managed hedge funds beat the market between the market low in March ’20 through to August ‘21 – compared to 37% of male-led funds. Long-term studies by Hedge Fund Research (HFR) show a similar trend, with women-managed funds outperforming their male counterparts from the dot-com crash through to the end of the global financial crisis.

By 2030, women are projected to control $34 trillion, roughly 38% of investable assets, almost doubling from previous years. This shift in financial power toward women underscores the urgency of increasing female representation in asset management. Firms that fail to attract female talent could lose a significant share of this growing client base.

This underrepresentation not only affects investors' returns but also makes the industry appear outdated compared to fields like healthcare, education, law, and accounting. Despite women making up nearly half of business graduates, only 33% of finance graduates are female. This lack of representation creates a self-perpetuating cycle—new graduates may feel discouraged from entering an industry where they see few female mentors or perceive limited opportunities for advancement.

Backtracking on Diversity Initiatives

Since the inauguration of President Donald Trump, Wall Street firms have begun scaling back their diversity initiatives. This shift aligns with a broader corporate trend of reevaluating DEI commitments in response to evolving political dynamics and external pressures.

The Controversial Quota Debate

The debate over implementing quotas to accelerate gender diversity remains contentious. Proponents argue that quotas are necessary to break systemic barriers and expedite representation. However, critics contend that quotas may lead to tokenism, questioning the qualifications of female appointees and potentially undermining their authority. This controversy underscores the complexity of addressing gender disparities in asset management.

Some Optimism: Encouraging Girls into Asset Management

While the current gender disparity in asset management is stark, the future does not have to follow the same trajectory. One of the most effective ways to close the gap is to start early—introducing financial literacy and investment concepts to young girls at an early age. Research has shown that women tend to be more risk-averse than men in financial decision-making, partly due to a lack of exposure to investing principles in their formative years. The industry can cultivate a stronger pipeline of female talent by integrating financial education into school curriculums and creating mentorship programs that connect female students with successful women in asset management. Initiatives like Girls Who Invest, which provides young women with the skills and internships necessary to break into the field, demonstrate that targeted programs can yield real results.

Financial literacy is increasingly being integrated into school curricula, a crucial step in bridging long-standing gender gaps in wealth accumulation, financial independence, and economic decision-making—especially for girls. Early exposure to financial concepts not only empowers them to make informed personal finance decisions but also prepares them to consider careers in asset management, an industry that has long struggled with gender diversity.

Diversity is Integral to the Industry's Success

The persistent underrepresentation of women in asset management leadership is not just an issue of fairness but one that impacts financial performance and industry innovation. While some progress has been made, the recent rollback of diversity initiatives by influential firms raises concerns about the future trajectory of gender equality in the sector. Addressing this imbalance requires unwavering commitment, systemic change, and a recognition that diversity is integral to the industry's success.

Disclaimer

The information contained in this communication is for informational purposes only. Confluence is not providing legal, financial, accounting, compliance or other similar services or advice through this communication. Recipients of this communication are responsible for understanding the regulatory and legal requirements applicable to their business.

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