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Selector views: A diverse team reflects positively on an asset manager

Citywire spoke to three local fund selectors about how they view gender diversity in the industry, following the release of the 2020 Alpha Female report.

As the 2020 Citywire Alpha Female report showed, women fill just 10.3% of portfolio manager roles in South Africa. To find out how fund selectors view this stark under-representation, Citywire spoke to three senior women in fund selection who have been in the industry for many years.

How do fund managers respond when this issue is raised with them? And does it affect selectors’ buying decisions?

Scroll through the slides to read their fascinating insights.

The full 2020 Citywire Alpha Female report is available here.

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As the 2020 Citywire Alpha Female report showed, women fill just 10.3% of portfolio manager roles in South Africa. To find out how fund selectors view this stark under-representation, Citywire spoke to three senior women in fund selection who have been in the industry for many years.

How do fund managers respond when this issue is raised with them? And does it affect selectors’ buying decisions?

Scroll through the slides to read their fascinating insights.

The full 2020 Citywire Alpha Female report is available here.

 

Monene Watson – CIO at Old Mutual Multi-Managers


As a fund selector, how conscious are you of this lack of representation of women at portfolio manager level?

For years I was conscious of often being the only woman in the room. Thankfully the team I am part of now is diverse and this is no longer the case.

While there are many teams that are still all male, and often also all white, there has definitely been change. Some companies have embraced diversity, and teams at these houses look quite different. While representation at portfolio management level might not yet be there, a pipeline is being built in these companies.

Recently one of our global managers promoted one of their female analysts to the portfolio management team of a very successful fund. So while change isn’t yet widespread, it is happening in pockets of forward thinking firms. These are firms that are generally strong on culture and innovation.


Do you engage with asset managers about this? If so, how do they respond?

One of our team members once asked an investment business whether they didn’t like women. There were no women in the team, let alone at portfolio management level. The response to a challenge like this has changed. It is sometimes met with embarrassment. Mostly there is an acknowledgement that this needs to change.

Yet when you look at these same teams a few years on, this dynamic still hasn’t shifted. So while there is acknowledgement that change is needed, I’m not sure that everyone really believes in the benefits of diversity. They therefore don’t change policy to affect this – for example looking at their recruitment processes to find and train women in this industry.


Does the level of representation of women affect your fund buying decisions?

A diverse team where women are well represented reflects very positively on an investment business. It takes time and effort to build diversity in a team, and particularly including women in an industry where they have previously been excluded.

A company that has women in senior positions across the business speaks to the culture and values of the business. It says they value diversity and have created an environment that allows women to have a voice.

There is often unconscious bias in the exclusion of women. For example, while women might be employed in a team, the culture and belief system could still exclude different perspectives and approaches.

A diverse team speaks to the traits we want echoed within investment decision making –amongst them diversity of thought and tackling of biases. We believe diverse teams should be better at navigating an ever changing world.

 

Victoria Reuvers – MD at Morningstar Investment Management South Africa


As a fund selector, how conscious are you of this lack of representation of women at portfolio manager level?

Very conscious. With that said, I am also equally aware that there are only a handful of portfolio manager roles available in South Africa. Secondly, the average manager tenure is long. Given how gruelling the process is to become a portfolio manager in the first place, people tend to stay in their roles for long periods. Thirdly, the role is very demanding time-wise and has historically required long office hours.

The industry has, historically, been rather rigid with its approach as to what is required of a portfolio manager. Hence many women would be excluded, given that these demands may not be conducive to being a mother as well.

I do believe this is changing, and I see many companies adapting work environments to accommodate the demands of modern life. In the same way that fathers have been given extended paternity leave, so too the industry has started to adapt by providing more flexible working hours to women (and men) that require dedicated family responsibility time.


Do you engage with asset managers about this? If so, how do they respond?

Unfortunately, this is a subject that is not often well-received and one that is generally answered in the standard textbook fashion.

With that said, firms need to look at how they can support the recruitment and retention of more women. There is an industry perception which clearly isn’t landing with young women, as the number of applications for junior roles remains low. Long-term investing is far from the macho image portrayed in movies, and firms should look at ways they can help to change this, starting with job descriptions.


Does the level of representation of women affect your fund buying decisions?

Not directly, as we select managers based on our research process which covers five key areas. Under our ‘Parent Pillar’ we cover aspects of diversity and inclusion, where we would assess the level of gender representation. The ‘People Pillar’ would cover the team, but the focus here is directed at the assessment of skills as opposed to gender.

I would, however, like to see gender diversity become something that is used as a measure when it comes to ESG portfolios. There are many established ESG measures to help investors pursue different approaches to investing sustainably, but there is room for further improvements as the quality and comparability of the data – from issuers and asset managers – continues to create challenges for investors.

For example, I would like to see funds requesting more disclosure on gender pay discrepancies, gender equality, or board diversity when it comes to shareholder composition. Funds should make an effort to make a measurable impact with investments on specific thematic areas like gender diversity and/or equality.

 


Claire Rentzke – CIO at Sukha & Associates


As a fund selector, how conscious are you of this lack of representation of women at portfolio manager level?

There is no doubt that this is an industry where men have been very successful and it continues to be an industry that is dominated by men. After years in the industry, I know that often I will be the only woman in the room. But this is not a phenomenon that is specifically South African, as globally the same is true.

I do think that locally there is more awareness of the need for diversity. As a fund selector, one of the things that we look for in a team is the presence of cognitive diversity. Cognitive diversity should create more robust decision-making processes as different perspectives and experiences allow for a more thorough analysis.

While this diversity doesn’t always automatically equate to racial or gender diversity (and it is easy to quickly stereotype people in discussions around diversity) the truth is that often women can be more risk averse, more willing to admit what they don’t know, and studies have shown that, on average, they do make better fund managers because they churn their portfolio less frequently.


Do you engage with asset managers about this? If so, how do they respond?

It is concerning that there are not more women who are in fund manager roles because there doesn’t seem to be a shortage of women in analyst roles, which is the training ground for future fund managers.

When we engage with asset management businesses on the lack of diversity within their fund managers, it is often acknowledged and seen as something that is definitely lacking in their teams. Many say that they are actively trying to recruit more women fund managers but are proving unsuccessful at it.

There is a split between those businesses who are willing to recruit seasoned investment professionals and those who look to “grow their own timber”. Neither of these models has proved particularly successful in increasing the number of female fund managers in the industry.

While no company intentionally sets out to impede the progression of women fund managers, there are often inherent barriers that do stop women from progressing. Asset management businesses would be wise to identify and break down those barriers. The reporting lines and the structure of the businesses may well play a role in creating an environment that is either conducive to the advancement of women or not.

Anecdotally, women seem to do better in environments that are structured more around collaboration, and less well in environments that pit people against each other and generate significant internal competition. But both environments can lead to good investment outcomes.

 

Does the level of representation of women affect your fund buying decisions?

Ultimately in selecting products for our clients, we want the best possible outcome for the client and we want to support sustainable businesses. We look for investment teams who can thoughtfully critique their investment decision making, who can assess the risks from all angles, acknowledging what they don’t know and deliver successful outcomes.

Diverse teams where women can succeed as women without having to try become more like men and bring their own strengths to the table and improve the robustness of the investment process and the industry as a whole is what we would look to support.

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