Hedge funds attract people with a certain swagger about them and unquestioning faith in their own abilities; alpha male characters who claim they can generate that elusive quality known as – well – ‘alpha’. Women are not known for blowing their own trumpet, which is a shame because they’re generally very good hedge fund managers.
One of the more telling things from a new report released by consultants Rothstein Kass is that women-owned and managed hedge funds were decidedly more realistic about their ability to generate returns this year. Not one of the women polled said they expected returns of more than 20% this year, compared to 20.1% of the total, despite outperforming their male-counterparts with 11% net returns in 2012. Women are creating alpha, but maintain a sense of humility.
Women may outperform their male counterparts, but they still don’t proliferate the hedge fund world. Developing a track record is key to success in front office hedge fund roles, so women need to shout about their successes more.
“Most of the positions that would enable a fund track record have been held by men,” said Kelly Easterling, a principal at Rothstein Kass and one of the authors of the report. “Because having a track record to market is critically important to a successful fund launch, the supply of women-owned or managed funds remains low.”
Like other parts of the financial sector, women are still struggling to break into front office and senior positions. Just 18% of the 366 funds surveyed by had women in CIO or portfolio manager positions, while women occupied 35% of senior operations roles and 34% of compliance positions.
Hedge funds run by women are generally more conservative when it comes to leverage and return expectation, said Easterling, and run smaller funds which “may be more nimble and thus be able to move in and out of the markets more efficiently, a definite plus in turbulent environments.”
Women’s lack of bravado hasn’t counted against them when it comes to attracting investors. In a tough fund raising environment, more hedge funds are chasing money from large institutional investors, and firms run by women have proven more successful at this, said Easterling. Part of this is down to their ability to generate alpha, she said.
“Many of the public pensions, in particular, are interested in more closely matching their manager talent with their constituent base,” she said. “It is rare that an institution has a constituent base comprised entirely of men, so why should all of their manager talent be solely male?”
Diversity initiatives like those found in the large investment banks, which are attempting to attract more women into a traditionally male-dominated industry, are not found in most hedge funds, said James Dewhirst, director at headhunters Investment Management Partners.
“Hedge funds are meritocratic and will recruit based on experience and track record, but it’s rare to find female portfolio managers,” he said. “We’re seeing a greater number of women at the junior level, in research analyst roles for example, so I would expect to see the pipeline of female talent improving over the years.”
Achieving critical mass in the industry is important for inspiring more women to enter, and stay in, the hedge fund industry. Carrie McCabe, CEO and founder of Lasair Advisors, told Bloomberg that she used to be the only woman in a room full of 50-100 investors. “About five years ago, I started noticing a few more. There are only a handful, but there are more than there used to be.”
“It’s important that professional women be there for each other,” she said. “When a professional woman succeeds – all professional women succeed. It’s very cumulative.”