Women in Portfolio Management: Outperforming the Field

Diversity in asset allocation is recognized as a key component of successful investment portfolio management. Investment diversification, if done correctly, can maximize market upside and mitigate risk. Portfolio concentration, unless conducted strategically with a strong portfolio composition, is far riskier. If diversity within portfolios is an accepted best practice, we were curious to see what the data shows about the diversity of teams managing portfolios.

Women Lagging in Portfolio Leadership Positions

The world of portfolio management has long been a male-dominated field. Only 14% of all large-cap asset managers in the 2022 Investment Metrics survey have a woman in a lead or co-lead position, and only 7% have a woman as CEO. Similarly, Morningstar reported that just 12.5% of portfolio managers across U.S. active and passive funds in 2022 were women.

A History of Outperforming the Markets

There is some evidence that funds led by women outperform those run by men, despite so few women competing in the marketplace. According to an analysis by Investment Metrics, women managed just $90 billion of the $698 billion in total strategy assets in 2022. Yet those teams performed far better than average that year, including during the market downturn. The report shows that portfolios at least partially managed by women lost a median of 2.6% between January and September 2022. Meanwhile, similar portfolios managed by all-male teams posted a median loss of more than double that, at 5.9%. Furthermore, the most consistently women-led portfolios have outperformed indexes 64% of the time dating back to 2012.

Why did women-led funds perform so much better during the market downturn? The answer may lie in their ability to diversify their portfolios. The best and brightest women fund leaders have managed to walk that tightrope between low-risk, high-reward investments. Morningstar recently listed the top women portfolio managers, which includes Fidelity’s Ramona Persaud and Pimco’s Sonali Pier, among others, who have managed to pull in significant risk-adjusted returns for their funds despite a volatile market landscape.

Looking Forward

It appears that diversification is not just a good strategy in investment allocation, it can be a winning formula for team management as well. If asset allocations follow financial performance, this suggests that assets managed by women-led or co-led teams should be increasing — which in turn could encourage more women to rise to leadership roles in the field.