Females in Finance – Coming Out of Hibernation

December 2, 2010 at 11:26 pm 4 comments

I’m not sure if you are like me, but the annual media ritual of myopically breaking down the sale of every shoe, belt, cell phone, television, and pair of underwear during the November/December holiday season can become very grating. What makes it a little easier for me to swallow is the stable of attractive female retail analysts who are finally unleashed from their long hibernation slumbers to review their mall traffic and parking satellite findings. I’m a happily married man, but I still cannot complain about seeing these multi-threat beauties dissect sales trends and fashion fads. However, in this day and age, I’m not so sure that females feel the same way about their under-representation in the finance field?

If there are 155.8 million females in the United States and 151.8 million males (Census Bureau: October 2009), then how come only 6% of hedge fund managers (BusinessWeek), 8% of venture capitalists, and 15% of investment bankers are female (Harvard Magazine)? Is the finance field just an ol’ boys network of chauvinist pig-headed males who only hire their own? Or do the severe time-demands of the field force females to opt-out of the industry due to family priorities?

Although I’m sure family choices and quality of life are factors that play into the decision of entering the demanding finance industry, from my experience I would argue women are notoriously underrepresented even at younger ages (well before family considerations would weigh into career decisions). Maybe cultural factors such as upbringing and education are other factors that make math-related jobs more appealing to men?

If underrepresentation in the finance field is not caused by female choice, then perhaps the male dominated industry is merely a function of more men opting into the field (i.e., men are better suited for the industry). More specifically, perhaps male brains are just wired differently? Some make the argument that all the testosterone permeating through male bodies leads them to positions involving more risk.  If you look at other risk related fields like gambling, women too are dramatic minorities, making up about 1/3 of total compulsive gamblers.

Women Better than Men?

The funny part about the underrepresentation of females in finance is that one study actually shows female hedge fund managers outperforming their male counterparts. Here’s what a BusinessWeek article had to say about female hedge fund managers:

A new study by Hedge Fund Research found that, from January 2000 through May 31, 2009, hedge funds run by women delivered nearly double the investment performance of those managed by men. Female managers produced average annual returns of 9%, versus 5.82% for men and, in 2008, when financial markets were cratering, funds run by women were down 9.6%, compared with a 19% decline for men.

 

The article goes onto to theorize that women may not be afraid of risk, but actually are better able to manage risk. A UC Davis study found that male managers traded 45% more than female managers, thereby reducing returns by -2.65% (about 1% more than females).

Regardless of the theories or studies used to explain gender risk appetite, the relative underrepresentation of females in finance is a fact. I’ll let everyone else weigh in why that is the case, but in the meantime I will enjoy watching the female analysts explain the minute by minute account of UGG and iPad sales through the holiday shopping season.

Wade W. Slome, CFA, CFP® 

Plan. Invest. Prosper. 

www.Sidoxia.com

Related Articles:

Harvard Magazine article 

BusinessWeek article on female fund managers 

Bashful Path to Female Bankruptcies

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds and AAPL, but at the time of publishing SCM had no direct position in DECK or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

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Another Year, Another Decade Winning Coaches Telling Players to Quit

4 Comments Add your own

  • 1. Jeff  |  December 3, 2010 at 11:33 am

    Nice montage!
    Top-Ranked:
    for Brains: Erin Burnett
    for Beauty: Not sure. What do you folks think?

    Reply
  • 2. Brett Alexander  |  December 3, 2010 at 7:27 pm

    Dana Telsey never ages. She will look like she is 22 when she is 60. Amazing.

    I am partial to Susan Li and Betty Liu on Blomberg. Margaret Brennan is super high class.

    Something about Trish Regan just does it for me.

    Reply
  • 3. Monevator  |  December 4, 2010 at 3:52 am

    Another explanation of female outperformance – if it’s harder for women to go into or succeed in finance (whether for genetic, prejudicial, cultural or whatever reasons) then perhaps those that succeed are the outliers — the best in their cohort?

    Whereas any old well-educated male chump can get some sort of job in fund management, and so pulls the averages down?

    Maybe somebody should launch a Fund of Female Funds? :)

    Reply
    • 4. sidoxia  |  December 4, 2010 at 8:28 am

      I love the Darwinian explanation…I smell a profit opportunity!

      ~WS

      Reply

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