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Special Report: Gender Gap

A long way to go in manager diversity

Joan Solotar called efforts to increase gender diversity ‘hand-to-hand combat.’

Efforts being made to draw more women into industry, but numbers illustrate gap awareness

Money managers are creating or expanding programs to increase the number of women in the industry, now a hot topic as high-profile pay and discrimination lawsuits grab headlines and investors press managers to disclose efforts to boost diversity.

"Programs are great but ... (increasing diversity is) hand-to-hand combat," said Joan Solotar, a New York-based senior managing director at The Blackstone Group LP, head of private wealth solutions and external relations. "It is incumbent on me and other professionals at Blackstone to make it work."

The money management industry is still pretty much an all-boys network, at least at the highest levels. Data quantifying the industry as a whole is largely lacking, but targeted findings include:

  • Only 9.1% of the CEOs and 6% of the chief investment officers of the largest institutional U.S. money managers were women as of Dec. 31, 2016, according to the most recent Pensions & Investments' money manager survey. While the percentage of female CEOs has risen from 8.5% in 2011, the percentage of women in the CIO role dropped from 7.5%.
  • Women make up just 25% of executive employees and 40% of all employees at the 61 companies that entered P&I's 2017 Best Places to Work in Money Management award;
  • A mere 9% of partners, general partners and managing directors with check-writing abilities at venture capital firms with fund sizes of $25 million or more are women, according to data compiled by All Raise, a sponsored project of Silicon Valley Community Foundation to increase the number of women in venture capital; and
  • A 2017 academic study of mutual fund managers found that all else being equal, female managers are less likely to be promoted and have shorter tenures than male fund managers.

Meanwhile, studies show women in top positions increase company performance. The more women in decision-making positions, the greater the returns for shareholders, according to a 2016 research report by Credit Suisse Group AG. Between Dec. 31, 2013, and midyear 2016, companies in which 25% of senior leadership were women outperformed the market at a compound annual growth rate of 2.8%, while companies with 50% female senior leaders outperformed the overall market by 10.3%, the study found.

Asset owners also believe gender-diverse investment teams perform better. According to a CFA Institute survey conducted in November and December, 55% of institutional investors stated that mixed gender teams would lead to better investment performance results because of more diverse viewpoints.

Firm executives said women are not applying for positions and the women they do hire leave before they can be promoted, often after they have children.

Others, in turn, point to what appears to be an inhospitable male-dominated environment that blocks women from getting hired, especially on investment teams, and from getting promoted or equal pay.

"Women do want a career and they do want to get ahead," Kathryn J. Stokel, New York-based managing director, chief operating officer at private equity fund-of-funds firm Abbott Capital Management LLC. "If you want to keep women, you have to pay them competitively. You can't assume they will work for less."

Not unprecedented

Among money managers, lawsuits claiming gender discrimination or harassment aren't unprecedented. Earlier this month, Stacy Schaus, executive vice president and defined contribution practice leader of Pacific Investment Management Co., sued the Newport Beach, Calif.-based money manager for age and sex discrimination affecting her pay and thwarting promotion. In January, Sara Tirschwell, a former manager of TCW Group's distressed strategy group and portfolio manager of the TCW Distressed Fund, sued the Los Angeles-based firm alleging she was fired after she had lodged a sexual harassment complaint with firm executives against her direct supervisor.

To be sure, corporate governance efforts to increase the number of women on corporate boards have been on the table for a while. And those efforts are starting to have an impact on hiring at money management firms, said Baltimore-based Lisa Kaufman, who will assume the post of CEO of global real estate securities at LaSalle Investment Management Inc. on Sept. 4.

"I think things are changing. I believe progress is being made and more will be made," Ms. Kaufman said.

Women account for 44% of all LaSalle employees worldwide and 30% of leadership. Women account for 40% of the leadership positions at LaSalle's securities business. In 2017 half of the executives who were promoted were female, up from 30% in 2015.

Jason Kern, Chicago-based CEO of the Americas at LaSalle, said he started tackling the issue in 2013 with a "Growth Through Inclusion" program, a two-day program focused on unconscious bias.

The firm has "done a good job" in the early stages, hiring women for 50% of its entry-level positions, he said. "They tend not to stick with us as long, and we are more non-diverse as you go up into the senior ranks of the organization. It's a problem for all of us (in the financial services industry) to deal with."

Three years ago, less than a third of promotions at LaSalle were female; in 2017, 50% of promoted executives were female. Mr. Kern said LaSalle added three female members to its North Americas board, diversifying what had been a 12-member all-male board. The firm is also requiring a diverse set of candidates when it hires, he said.

Investors like BlackRock (BLK) Inc. (BLK) and State Street Global Advisors also are pushing gender diversity, Ms. Kaufman said.

"I think it will bear fruit," Ms. Kaufman said.

State Street's Fearless Girl promotion could be boosting applications by women. State Street executives saw a 39% increase in the number of female applicants in March 2017 following the installation of the Fearless Girl statue on Wall Street. The number was 56% higher than the firm's prior monthly average of female applicants, said Julie Kane, State Street spokeswoman.

According to SSGA's filing for the U.K.'s gender pay reporting requirement, 22% of firm executives at the senior vice president level and above in the U.K. are women and 32% of executives at the managing director level are women. The largest number of women is found at the associate level, 46%.

"We know we need more women in senior roles. We have made some progress — but it is not enough," SSGA noted in the U.K. report. "This is a major priority and focus for us."

Asset owners weigh in

An increasing number of asset owners also are pushing managers to provide information on the number of female employees and women in senior roles. Some of these efforts are combined with emerging manager programs that investors expect will result in additional capital invested with women- or minority-owned firms.

Across alternative investment firms, 18.8% of all employees and 9% of senior level executives are women, according to an October report by London-based alternative investment research firm Preqin. Of all the alternative investment asset classes, private equity has the lowest percentage of female employees, overall and at the top, 17.9% and 9%, respectively. Real estate has the highest percentage of women employees, at 20.6%, but falls in the middle for senior positions, with 10%.

Real estate could be losing ground on gender diversity. According to P&I data, a mere 1.2% of CIOs at large institutional real estate money management firms were women in 2006, down from 2% in 2011 and 5.9% in 2006.

It's tough for women to step into investment management jobs. Investor relations and marketing has the highest percentage of female workers, employing 45% of women working in alternative investments. Women hold, on average, 15% of investment team positions, across all alternatives asset classes, the Preqin report shows.

Some alternative investment managers are making concerted efforts to increase gender diversity.

At Abbott Capital, which has $8.7 billion in assets under management, 50% of its employees are women; 50% of its 28 female employees are senior staff; and 36% of Abbott's owners and voting members are women.

Before joining Abbott two decades ago as a partner, Ms. Stokel was portfolio manager of a $3.5 billion private equity portfolio at General Motors Investment Management Corp.

Heads of many private equity firms have a hard time sharing the economic pie to make room for underlings to advance, she said.

"It's easier for them (firm founders) to move over for a guy," Ms. Stokel said. "So, women find another job."

Ms. Stokel said Abbott's culture is more inclusive than at many alternative investment firms. She credits the firm founders, Stanley E. Pratt and Raymond L. Held, as well as current leaders Thad Gray, managing director and CIO, and Jonathan Roth, managing director and president, for diluting their own economic interest to bring her on as a partner with an ownership stake.

"Hiring women is not enough. You have to give them the same opportunities as everyone else. They need their voices to be heard and they need to be treated professionally," Ms. Stokel said.

Trending downward

Overall, the percentage of women in money management has been trending downward since the dot.com bubble burst, according to the 2017 study "Performance Isn't Everything: Personal Characteristics and Career Outcomes of Mutual Fund Managers." The research — by Brad M. Barber, associate dean and professor of finance at the Graduate School of Management, University of California, Davis; Anna Scherbina, associate professor of finance, at UC-Davis' Graduate School of Management; and Bernd Schlusche, principal economist, Board of Governors of the Federal Reserve System — found that "while the fraction of women in the money management industry was rising in the 1990s ... the percentage of women working as mutual fund managers declined from a peak of 13.83% in August 1999 to 9.78% in December 2016."

The study found women have shorter careers in money management, even though the authors found no significant difference in terms of returns and fund flows between male and female fund managers. Rather, returns of female managers are less volatile than the returns of other funds in the same investment category, the paper noted. ​

Women in senior positions at top firms say that what helped them along was not only having a mentor, but also having a person who promoted them, pushed them and encouraged them to advance in their careers and offered them as candidates for advancement. Some alternatives management firms are making a concerted effort to foster those relationships.

The Blackstone Group LP is taking a grow-your-own approach. Five years ago, the New York-based alternative investment manager started an intensive two-day program for college sophomores, the "Future Women Leaders Program," in which around 30 women spend time with Blackstone's leaders and business heads, Ms. Solotar said.

Ms. Solotar said she started mentoring women at the firm informally when she joined Blackstone in 2008 as a partner and management committee member.

Then Hamilton "Tony" James, executive vice chairman of Blackstone, and a member of the board of directors, asked her to create a women's network and she agreed, with a caveat that the network not hire and promote people merely because they were female, she said.

At the time, firm executives realized the applicant pool did not mirror the percentage of women attending college and business school. For example, Blackstone's applicant pool was 10% female, despite 40% of the Harvard Business School class being female.

So, firm executives starting meeting with college freshmen and sophomores.

"How do we pull more women into the top of the funnel. The college population was clearly 50/50, but women were small percentage here, just as at other financial services firms," Ms. Solotar said.

So far, Blackstone has hired 23 analysts who participated in its Future Women Leaders Program.

In 2013, Blackstone started a program in which the incoming class of entry-level female employees is grouped together and matched with sponsors at Blackstone, who support them through their careers, she said.

Now Blackstone is focused on supporting women at the midlevel of their careers.

"We don't have higher turnover of women than men, and we want to make sure we don't have the common derailers of women — that they communicate too passively, or they are not asking for bigger deals or promotions or what have you," Ms. Solotar said.

These women also are given sponsors.

Getting a push

"I had someone — and other senior women all have said they had someone — who pushed us ... (someone) to say that you absolutely can and you will," Ms. Solotar said.

Blackstone also has a four-month maternity leave and a program to help ease new mothers back into work, resulting in zero attrition among new mothers.

There still is more work to be done, Ms. Solotar said, because there are not nearly enough women at senior levels of Blackstone. Some 30% of the professional level at Blackstone are women. Over the past couple of years, women have accounted for 35% to 45% of the analysts each year.