The 1960s stereotype the fund management industry just won’t drop

Stereotypes die hard.

Back in 1963 the son of the prime minister, Maurice MacMillan, gave a talk at the House of Commons in his capacity as chairman of the Wider Share Ownership Council.

He noted that 1.5 million of the 3.5 million shareholders in the UK at the time were women, and announced that he felt they should be more active in the City. He thought they would bring “common sense attitudes and approaches” with them that would “lighten City solemnity” and knock out its “often incomprehensible jargon”.

This idea that women can somehow bring a sense to investing that men can’t grasp is fascinating in its longevity. Here’s a recent article about IFAs, and how it is time for the sector to “ditch the macho culture” to get more female advisers in.

Why? They are socialised to somehow be “more ethical in their treatment of clients” and to be more “loyal and conscientious”. They “pick up on things” better than men and are “far more disarming when dealing with stroppy clients”. And of course they “feel” for their clients more than men.

Here’s another. This one explains why women are better hedge fund managers than men (more risk averse, apparently) and another along the same lines claiming that women are “mostly better” investors than men.

Is any of this true?

Lots of people think so, and a good many male managers like to think they can boost their equality credentials by going on about it (to me at least). But the answer so far is that there is absolutely no evidence to back it up.

Surveys of individual trading accounts in the US which show female accounts outperforming don’t, on closer examination, show us that women are better stock pickers than men. Instead, the only reason the female-run accounts outperform on average is because they tend to be traded less than the others, and because those lower trading costs compound to make the difference.

That doesn’t tell me women are better at investing than men. It tells me something else – that middle-aged women with spare cash have less spare time than middle-aged men with spare cash.

And the studies that show female hedge fund managers are better than male ones? They don’t tell me that the average female is better than the average male. They tell me that the average woman who bothers to make her way to the top in the very, very male world of hedge fund management is likely to be way more ambitious and significantly better at her job than the average man who makes it to the top of the same world.

It’s that simple.

  • modsa

    Merryn, you’re spot on, my wife looks after the important things like the day to day running of the house while I do the investment research. She then looks at the facts and decides whether or not she will invest. Overall she does rather better than I as she invests less frequently with larger sums, thus saving on costs and because her decisions are at one remove she doesn’t get tied up with impulse buying as I tend to. Its not so exciting but a lot more profitable!

  • Longtermyieldman

    It may well be true to say that the average woman may demonstrate personality traits that better equip her to manage investments than the average man. However, fund managers are not average people, be they male or female. And it does not follow that the atypical women who are selected for such roles are positively differentiated from their also-atypical male counterparts.

    A lot of research has been undertaken in recent years on what different societies believe constitutes a leader. In the Anglo-Saxon world, two surprising characteristics are highly prized: extroversion, and tallness.

    Very few FTSE100 board directors score an ‘I’ (for introversion) in a Myers-Briggs personality test; equally, those under six feet tall are in a minority.

    This is a problem because there’s also research showing that introverts are the best leaders of motivated, white-collar workers because they are better at creating environments in which employees’ ideas can be aired and actioned, and because, while height would at first appear to be a random genetic characteristic unrelated to leadership ability, in practice it is possible that taller people are more physically domineering, again mitigating against thoughtful introverts speaking out.

    I sometimes think the investing media add to the problem by creating and lionising ‘star’ fund managers – Woodford, Buffett, Slater and others. In truth, the best manager may be the person with the greatest ability to spot, nurture and listen to brilliant teams of analysts, as opposed to iconoclastic individuals who develop personal followings that reflect, and reinforce, commitments to stated, inflexible investment strategies.

  • Natalie

    Merryn what is your evidence for the statement “That doesn’t tell me women are better at investing than men. It tells me something else – that middle-aged women with spare cash have less spare time than middle-aged men with spare cash.”?