Given the stubborn gender gap well established in the investment industry, bringing more women into the sector will move a long way toward achieving investors’ long-term goals, notes State Street.
State Street published a report titled: “Addressing Gender Folklore” after conducting a survey of 864 investment professionals in 19 different countries.
Gender gap across investment community
The State Street survey highlights a significant gender gap across the professional investment community. Moreover, the gender divide is even wider if one looks at the most influential people in the investment industry viz.: portfolio managers, analysts, executives and other investment professionals:
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The State Street report segmented investors into two main groups of investors: professional and individual investors. The survey points out female professional investors tend to be more long-term goal oriented than their male counterparts. More women in the asset owner segment (26% of all women respondents) measure success as relative to their organizations’ long-term goals, as opposed to only 21% of men.
Moreover, when it comes to selecting an investment provider, female asset managers rank trust and reputation as the top factor, while men rank past performance as number one.
Turning its focus on how skill is demonstrated, the survey points out that more women see skill as understanding the market, information or risk, while for men, skill is proven by higher risk-adjusted returns:
Overall, it was revealed women focus more on understanding, articulating and incorporating client goals (both short-term and long-term) in their decision making, while men tend to focus more on metrics and deliverables.
The State Street research also highlights that women can deliver alpha while maintaining suitable risk levels. More significantly for their clients, they emphasize with their long-term goals, which the report believes could be the spark that helps the investment industry progress towards greater true success.
Survey results on individual investors
After surveying over 2,880 individual investors across 16 countries, the State Street survey also highlights what differentiates women and men when it comes to investment decision making. The survey notes women are more likely to make decision collectively, with 34% of women conferring with a spouse, compared with 18% of men.
Highlighting personality traits, the survey notes women are more likely to admit what they don’t know about an investment:
The report notes women appear to be more risk averse, a finding that is echoed in much contemporary academic research:
Despite strong evidence that a more gender-balanced investment industry would be valuable to investors, the report questions why women are still so underrepresented throughout the industry. The report believes folklore in the industry is at the heart of this disconnect. The report defines folklore as the literature of knowledge, art and practice disseminated through behavioral example and oral communication.
To address the question of closing the gender gap in the investment industry, the report suggests three important and interrelated approaches to help break the optical illusion around gender differences viz: (i) acknowledge and better understand the impact of gender folklore, (ii) increase the presence of women in business-critical leadership roles and (iii) approach the issue of gender folklore as a business problem.
The State Street report concludes that eventually the investment industry will no longer need to strive for gender diversity – instead, we will strive for a diversity of views and talents devoid of all unhealthy folklore.