Women don’t outperform men – excellent women outperform average men

Hedge funds run by women do better than those run by men. That’s a dead cert. Or so says Stephen Foley in the FT.

Those that women own or run have “beaten the industry average on a one year three year and five year view.” Go back to 2007 and it looks even better: they have returned 59% against an average of 37%. There’s no arguing with the numbers.

The question, then, is why do women do better? Foley has the answer to that too: women are better risk managers, “less prone to wild gambles, much less likely to trade in and out of positions in response to market volatility, and generally more likely to take a long-term view”.

To Foley, that means that if we want to see the hedge fund sector doing better than it is at the moment (this isn’t much to ask, by the way – the sector’s performance is beyond pathetic) it needs to hire more women – quickly, and preferably by institutional investor mandates. “If more of the $2.7trn in hedge fund assets were institutionally earmarked for female managers, the industry would quickly find a way to meet the demand” and the result could be that it is pulled out of its underperformance funk.

This is all possible, I suppose. But it is more likely to be complete nonsense.

There are sensible arguments to be made for diversity (I’ll come back to this another day). But there is a very good reason the women running hedge funds are better than the men. The hedge fund industry is a Mayfair man’s world. It’s all about longish hours, trading, boasting and being available for markets and clients non-stop. Setting up on your own is also pretty tough – and very risky.

Not many women fancy that (or the sexism that often joins it) so they don’t bother to get into it – or get to the top of it. There are plenty of other highly paid careers around. Some do bother, though – the ones who really love it and who are exceptionally good at it; the ones who are super tough and able; the ones who perform so well that they can’t be gender stereotyped out of the business.

But the thing is that these women aren’t excellent hedge fund managers because they are women. They are excellent fund managers because they are the very best, the very smartest and very much the most ambitious women in the industry.

Women don’t outperform men. Excellent women outperform merely good men.