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The subtle bias locking high-performing women out of hedge funds

Photo by m thierry via Flickr

If you want to find a high-performing hedge fund, look to one without testosterone-clouding judgement – women-owned funds have once again outstripped their rivals, but are still struggling to raise cash from investors. What’s more, aside from the women who have decided to go it alone, you’ll find the majority of female hedge fund professionals working in compliance or finance functions.

Women-owned hedge funds returned 9.8% on average from January to November 2013, according to a study released today by Rothstein Kass, compared to 6.13% for the HFRX Global Hedge Fund index. Meredith Jones, a director at the firm, says that “studies show that testosterone can make men less sensitive to risk-reward signals” and their research confirms this.

Women launching their own hedge funds not only post better-than-average performance, but are also highly experienced – 70% of the 80 women running funds interviewed by Rothstein Kass had more than 11 years in the industry. And yet, perhaps predictably, women still find it tough to raise funds and secure employment in the industry.

One female portfolio manager responding to the survey says: “If a man launches a new fund, it is much easier for him to get capital. Zoe Cruz, a top Morgan Stanley woman, couldn’t raise funds for critical mass. With her track record, if she were a man she would be funded. There is sexual bias in the finance industry. Another woman manager with a great track record barely broke $1bn of capital.”

Breaking into a front office or senior position is difficult regardless of your gender, but women are excluded from the subtle recruitment mechanisms that exist in the comparatively small hedge fund world, believe women responding to the survey.

Senior male industry figures “don’t socialise” with females, says one respondent: “Often, we recruit people to join our firm because they are well known to us. If they don’t get to know women, they aren’t likely to hire any.” This was one example of the oft-cited “old boys’ network” that excludes women from the industry.

It’s a stereotype in finance that women struggle to break into front office or senior finance functions, and are instead ushered towards areas like compliance and operations. This, unfortunately, holds true in the hedge fund sector.

Women hold just 22.5% of portfolio manager/CIO roles and 17.2% of CEO positions. And yet, nearly 40% of senior finance positions are held by women, 38.1% of compliance roles and 34.3% of C-level operations jobs.


Why do women struggle to break into hedge funds? The biggest proportion of respondents – 48% – cite supply issues. There are simply, they say, not enough positions available for women in the industry to develop a track record. However, 46.2% also said there was no desire for women to enter the industry.

AUTHORPaul Clarke
  • er
    18 January 2014

    1. Zoe Cruz never ran money at MS. Being head of fixed income doesn't give you a track record running money
    2. Investors are hungry for returns. If you can show a consistent record of good risk-adjusted returns, I can't see why they care whether the person running it is a man, woman, dog or martian
    3. If people don't like your work, the first thing is to ask why ... rather than jump to the conclusion that you are discriminated because of your gender/race/school you went to. Most of the time it's because you are crap rather than the other person is biased

    HF is a meritocratic business. If you don't deliver, it doesn't matter what you did or where you came from, and vice versa

  • wh
    16 January 2014

    I agree with the previous comment 100%. There is one thing that people very conveniently ignore about women in banking = women DONT apply!
    There are all these statistics about how only x% make up women traders etc. etc. but the whole point is that it is an incomplete argument. Have you ever stopped to think that maybe women just want that job?

    If you want to actually prove that women are discriminated against in the hedge fund sector you need to show that a/b is a small number where a = number of women who applied, b = number of women who were accepted for these jobs, i.e. the acceptance rate of women for hedge fund jobs assuming that they had a positive track record. You only have 'b' (i.e. women working in hedge funds), and you are dividing that number by the total number of traders in hedge funds. Absolutely ridiculous research and does not show anything of value except the distribution of sex in the hedge fund industry. When you manage to get hold of the real numbers for 'a', please write another article, however I think you will be disappointed to find out that 'a' is actually a very small number.

    Let me give you a piece of advise, hedge funds in particular couldn't give a s**t if you are blue, purple, yellow, red, black, brown or white in color, they don't even care of you a dog, cat, mouse, dinosaur or extra terrestrial being - as long as you can make them money - you will be hired.
    They only care about one thing - MONEY/RETURN/P&L. If you are good trader, you will be hired.

    There is nothing more to it.

    Following your line of thinking, hedge funds also discriminate against people from Mars (because they don't hire even one!).

  • Hi
    15 January 2014

    Oh I just love that Zoe Cruz mention!!! Whichever woman who said that in the survey should just realise that she isn't that good.

    Did Mrs Cruz have a great career at MS - yes. But what was she doing at MS? Was she taking (a the same vein to a hedge fund) prop bets with the firm's money? No - she was (ultimately) running FICC. And the background was in sales. Flow business. Not really that similar to running a hedge fund.

    Also - one of her co-heads who she was promoted above was Neil Shear. He launched a hedge fund (Higgs Capital in London (with another senior MAN) Jean Burlot), and that closed down after not raising enough assets too. So this doesn't just happen to women, but to men too.

    Just sit down, shut up and stop complaining, thinking it's because you're a woman. Its not. A woman, like a man, will get there if they are good enough, combined with a bit of luck.

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