Does gender really play a role in investment performance? A study taking in about 57 000 funds launched globally over 10 years by Morningstar into the performance of new funds suggests that female fund managers attract more money than their male counterparts. The researchers don’t think that this is because we naturally trust women more with our money. Instead, one theory they have is that it is so hard for female fund management professionals to get ahead in the investment industry that it is a case of survival of the fittest. Exceptional talent is required for women to make their mark as asset managers. As investors are attracted to the higher-performing fund managers, it stands to reason that investors are more likely to end up opting for a female fund manager. The other, less kind, theory is that women attract assets because they tend to work within an investment team – and investors are attracted to larger teams. That hypothesis will be put to the test in another research project soon, says Morningstar. Women have been traditionally under-represented in the asset management sector and there is pressure on companies to redress the imbalance. For investors considering putting cash into a new fund, this research suggests it might be worth paying close attention to the gender of the fund manager when making a final selection. – Jackie Cameron
By Lee Davidson, Madison Sargis and Timothy Strauts*
Female portfolio managers tend to garner more assets. The inherent trait of a manager’s gender affects flows into a fund. To determine an investor’s perception of a portfolio manager’s gender, we calculated the probability of being female, given a first name and birth year. For a team-managed fund, we used the highest probability of all the fund’s managers. Instead of using a binary indicator variable, the continuous probabilities can tell us about an investor’s perception of gender. If investors can automatically assume a portfolio is managed by a woman, do they prefer that fund more than a fund with less clear information regarding the manager’s name? In doing so, we can test whether there is an overall investor bias for female portfolio managers.