It is estimated by Bella Research Group and the John S. and James L. Knight Foundation that less than 5% of hedge funds are women-owned. There are a good handful of male-run funds. But a study by Hedge Fund Research noted that women hedge fund managers delivered nearly double the performance of men from January 2000 through May 2009. More recently, during the Covid shutdowns of early 2000, women led funds were down only -3.5% versus other funds which lost -5.5%. Furthermore, during the market rebound from March-August 2020, 48% of female led funds beat the market, versus only 37% of male managed funds, according to a study by Goldman Sachs. In a persistently male-dominated industry (and I mean male-dominated by a staggering amount!), how are women portfolio managers able to outperform?
Some believe that women outperform their male counterparts because they trade less frequently, have a longer-term view, think more openly, and are less over-confident when it comes to assessing risk. When I was first promoted into a position managing a team of brokers at Charles Schwab, my father told me this: “to be a good manager of other people, you must first learn how to manage yourself.” When I launched the Pawleys Dividend Fund and Pawleys Growth Fund, his words rang in my head – I had better be able to manage myself and my emotions well if I wanted to manage a portfolio of stocks well! I knew I had a good portfolio construction process and stock selection methodology. In my opinion, what derails investors is the emotions of fear, greed, and overconfidence. We become reactionary during extreme markets – to the upside and downside. And we become married to our ideas and seek information that confirms our opinions, as opposed to consistently questioning and testing our beliefs. Core principles are key to delivering good investment performance, but it is critical to be continually working to improve portfolio management processes. Perhaps women tend to be more thoughtful and less apt to have exaggerated knee-jerk reactions?
I don’t beat the market every year, but the numbers speak for themselves, and am humbled yet proud to be a part of female-owned firms that consistently outperform the boys club of Wall Street.
Source: Forbes, Hedge Fund Research, Goldman Sachs Investment Research.