A recent study shows how few women hold ownership or investing positions at hedge funds, but that isn't a good thing. Studies also indicate that women tend to outperform men at hedge funds, and a new whitepaper offers some possible reasons why.
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A wide disparity
In the recent whitepaper, Peltz International noted that men have long dominated the hedge fund industry and continue to do so. The disparity between men and women in leadership positions at hedge funds is one of the highest disparities in finance.
Peltz found that a disproportionate number of women on Wall Street are in sales, marketing and operations positions. However, those positions have not led women into research analysis and portfolio management positions, usually the highest-paying positions at hedge funds.
The firm cited a Preqin study which found that 20.3% of hedge fund employees were women at the end of 2020, up from 19.3% in February 2019 and 18.6% in October 2017. The study also indicated that women held 31.5% of junior-level positions, 23.7% of mid-level positions and 12.2% of senior-level positions.
Women are just a tiny share of hedge fund managers
Amanda Pullinger, CEO of 100 Women in Finance, told Peltz that it's challenging to know what percentage of hedge fund investment roles are filled by women or what percentage of industry assets are managed by women.
However, "anecdotally and broadly speaking for the investment world," she estimates that women fill about 10% of investment roles, and she doesn't believe the percentage has changed much in the last 20 years.
Zeroing in on hedge funds specifically, she estimates that women fill about 7% of investment roles. Pullinger believes the percentage is even lower for private equity and real estate. She sees a higher percentage of women at long-only funds and mutual funds.
Peltz also cited a report from Bella Research Group and the John S. and James L. Knight Foundation, which found that less than 5% of hedge funds are women-owned. Aberdeen Standard estimates that women manage only 1% of hedge fund assets.
Women attract less money
Peltz also pointed to various reports about hedge fund start-ups launched by women. In 2018 and 2019, there were several launches led or co-led by women. Jane Buchan attracted $100 million for her Martlet Asset Management, while Lauren Taylor Wolfe's Impactive Capital launched with $250 million from the California State Teachers Retirement System. Rebecca Pacholder secured $100 million from Leon Cooperman, her former boss at Omega.
However, male-led hedge fund start-ups attract more seed money than women, according to Peltz. The firm said the biggest-ever launch was Michael Gelband's ExodusPoint, which started in 2018 with $8 billion.
In 2021, at least four hedge fund start-ups are on pace for at least $1 billion in capital. Niall O'Keeffe and Tio Charbaghi, formerly of Citadel, launched FIFTHDELTA with $1.25 billion. Ami Adel-Misih launched Mane Global with $1.2 billion. Grant Wonders, formerly Viking Global, launched Voyager Global with almost $1 billion. David Kroin launched his Deep Track Capital with $800 million and another $500 million expected by the end of the year.
Data from Whale Wisdom shows that Impactive Capital had $873 in assets under management at the end of this year's first quarter, while Angela Aldrich's Bayberry Capital had $747 million. Both funds have had tremendous returns this year. Impactive returned 20.9% for the first quarter and 125.7% over the last four quarters, while Bayberry was up 4.9% for the first quarter and 45.3% for the last four quarters.
Female hedge fund managers outperform men
Peltz cites several studies that indicate that female hedge fund managers often outperform their male counterparts. A study conducted by Goldman Sachs found that 48% of female-managed hedge funds beat the market between the market low in March 2020 through August, compared to 37% of male-led funds. Additionally, women-led funds held up better in the pandemic meltdown that hit bottom in March 2020.
HFR found in one of its studies that women-led funds outperformed between January 2000 and May 2009 between the dot-com crash and the Global Financial Crisis. In 20018, funds led by women declined 9.6%, while funds managed by men declined 19%.
Why women tend to outperform men
Peltz suggests that women outperform men because of good decision-making skills like considering other viewpoints and encouraging others in the firm to speak up. Women also often have a longer decision-making process.
Further, since women are not in the boys' club, they are often more unconventional in their approach to risk management. The firm also found that women-led hedge funds trade less overconfident and focus more on risk management.
Critics of these studies note that the sample size of hedge funds managed by women is too small and that they haven't been around nearly as long as the funds managed by men. Additionally, men and women assess risk differently, which may not be quantifiable.
