Women-Led Hedge Funds Earn Higher Returns

Over the long term, women-controlled hedge funds have produced higher returns for investors. But finance is still a men's club.
Alissa PonchioneJanuary 21, 2014

While the finance world is often dominated by men, a small group of women-controlled hedge funds are bringing in the money. According to a recent report by consulting firm Rothstein Kass, an index of female-run hedge funds returned 6 percent in the six-and-a-half years ending June 2013, better than the S&P 500 (4.2 percent) and the HFRX Global Hedge Fund Index (-1.1 percent).

“There is meaningful alpha to be gained from investing in women-owned and managed funds,” Meredith Jones, a director at Rothstein Kass who wrote the report, said in an interview with the New York Times. “There appear to be both behavioral and biological factors that impact women’s ability to manage money and make them consistent.”

Rothstein Kass’s “Women in Alternative Investments” report, which surveyed 440 senior women in the alternative investment industry, found that the characteristics of a longer, slower-paced investment race are more suitable to women, who may act less impulsively than men.

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Yet, women are still on the outside of the finance world and struggle to penetrate the “boy’s club” that has been ingrained for years. The women surveyed by Rothstein Kass exhibited longstanding frustration with the industry. One women commented that although she feels confident in her abilities, “the fact that this industry is run like a country club — at best, locker room at worst — makes it difficult to be seen as anything other than an object for amusement. Women just aren’t taken seriously, and if you somehow make it into one of these places on [the strength of] your credentials, you are relegated to tasks no one else wants to do.”

Despite the evidence women-led funds produce better returns, fewer women expect more of such funds to be established this year. In 2012’s Rothstein Kass study, 45 percent of respondents thought there would an increase in women-owned or managed hedge funds launched; only 40 percent think that will happen in 2014.

Academic evidence has shown that having a woman as CFO also produces returns. In a 2009 CFO story, “To Make Investors Happy, Hire a Woman as CFO?,” David McCann looked at a study that found stock markets react favorably to both acquisition announcements and secondary equity offerings made by companies whose finance function is run by a woman.

In the study, the total growth in assets was 17 percent lower at companies with women CFOs, but the deals women made were of higher quality, at least when measured by investor response. “Specifically, the stock-price reaction to acquisitions was approximately 2 percent better when women were running the finance department,” McCann wrote.

Source: Want Better Hedge Funds? Try One Led by a Woman