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

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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.

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