Gender diversity has taken a back seat in 2020, but the pandemic may have longer-term consequences for women in investment management. On the one hand, the outlook has never looked better with women increasingly represented at the top of major asset management organisations and real progress on the gender pay gap, on the other, there is a danger that Covid has dented the pipeline of future leaders.
It is easy to point to a range of senior women in asset management to suggest the system is working well. From Anne Richards at Fidelity, to Rachel Lord at Blackrock, to Hanneke Smits at BNY Mellon. Richards recently said that the culture was changing from ‘lad culture’ to one where she was “no longer the only woman in the room”.
However, before the industry starts to congratulate itself, it is clear there are still problems. Data from Morningstar shows that in terms of women fund managers, the industry has made no progress in 20 years – in 2000, 14% of fund managers were women and that was unchanged at the end of 2019. This was a global statistic, but the report also showed that some of the world’s largest financial centres remained below the global average, including the UK, where just 13% of fund managers were women.
There is still a significant gender pay gap. The most recent Investment Association data showed an average gender pay gap of 31% among its member firms. This is around double the pay gap across all sectors and is far higher than equivalent professions such as law (currently 8.3%). A significant contributor to the pay gap is that women are under-represented in senior roles – they made up only 20% of the top quartile by pay. JOHCM chief executive Alexandra Altinger says: “Don’t be misled. There are very few female CEOs and lots of big asset management firms.”
Addressing the pay gap issue
The figures are moving in the right direction – the gender pay gap was 38.5% for the prior year – but still some way from equivalence. Companies recognise the problem: Jackie Boylan (pictured), head of Fundsnetwork, says: “The underlying reason for many gender pay gaps in the asset management industry is that more men tend to work in investment and senior leadership roles, where salaries tend to be higher. As a company, we’ve been tackling these imbalances through our gender initiatives, leading to improvements in women’s representation in many areas of our business.
“We have achieved this progress through driving greater gender parity in recruiting, promoting and retaining women across the firm, with the greatest focus on investment, technology and senior roles.” The group, along with other industries behemoths such as Schroders and Vanguard, has been closing both its gender pay gap and bonus pay gap.
The increasing body of evidence that suggests women-led or mixed teams bring about better results than male-only teams is another incentive. Recent research from Goldman Sachs, for example, showed that women fund managers outperformed male fund managers during much of 2020 – from the start of the year to the end of August, funds run by women dropped an average of 0.6% compared with their benchmarks, while all-male funds dropped 1.6%.
How will Covid affect gender balance?
Will Covid help or hinder the gender balance in asset management? On the one hand, the Covid crisis removed a significant barrier for women in the workplace, removing the ‘out of sight, out of mind’ problem that had been a major hindrance for women who wanted flexible working. Altinger says: “This is very relevant. Women want the ability to work from home. Last year showed that they can work effectively without being in the office.”
Company meetings increasingly take place online, reducing the need for travel. This may be helpful for women fund managers, but also has other advantages. Alexandra Jackson, manager of the Rathbone UK Opportunities fund, says she has been able to see more companies over the past 12 months. “It has become quicker and easier to conduct company meetings,” she says. “We’ve seen 450 companies in the past 12 months; that’s 100 more than we would normally see.”
She says this may slip a little as pandemic rules are restricted and it will take “bold people to try and hold the line”. She also emphasises the importance of ‘informal chatter’ – the conversations shared from the meeting room to the lift that help build long-term relationships. As such, she believes fund management won’t be a full-time work-from-home job, but “I’ll be disappointed if we’re all back in the office five days a week and we’ve wasted the opportunity to build a more inclusive industry.”
Altinger believes this will prompt a change of attitude on the behalf of employers. Rather than needing a compelling reason to be granted agile working, she believes asset management groups will now need to demonstrate a compelling reason not to grant it. This will be important for people trying to juggle family life and their career.
The uglier side of the pandemic
However, the pandemic has come with an uglier side for women in investment management. The burden of managing home schooling has disproportionately fallen to women.
Bev Shah, co-founder and CEO of City Hive, says: “For many, the new normal has meant more childcare and schooling, more food shopping and cooking, more cleaning and more worry – not ‘having it all’, so much as ‘doing it all’. This may have forced some women out of the industry, and we will likely see some of that change over the next year.”
Boylan agrees: “There is a very real risk that years of progress on gender equality could be unwound unless steps are taken to regain some of the ground that has been lost over the past 12 months.”
Richards has spoken about the importance of challenges of keeping women fund managers as they face these difficulties at home. The danger, she says, is that they lose the pipeline of talented women, likely to be the CEOs and top fund managers of the future.
Nevertheless, Shah is hopeful in the longer term: “We can hope that amid the upheaval we can see that work places – particularly global ones – can easily be more flexible, while being productive. Intransigent management that has blocked flexible or agile working has been forced into a largely successful experiment, despite the additional caring responsibilities that a lot of women faced. In the longer term, moderation will be the key – we must re-introduce buffers between the workplace and home, or everyone will burn out.”
Initiatives in place
In the longer term, there are important initiatives in place to bring more women into the investment management industry. Investment 2020 has been put in place to encourage a more diverse work force. This is a careers service where school leavers and graduates can learn about the investment management industry. It provides access to programmes across 42 partner companies.
Jackson has been involved in the ‘She Can Be’ initiative as part of the Lord Mayor’s Appeal. For this, City institutions bring in girls from less-privileged schools where role models are scarce and where parents are unlikely to be in professional jobs.
“We spend time talking to them about the sort of careers that are available in financial services, about our routes into the industry, making it clear that you don’t need to be a maths genius to do it and that there are also creative roles, such as marketing or PR,” says Jackson. The aim is to demystify the industry and show that it is open to people from all backgrounds.
Atlantic House Investments has sponsored the Super League netball team London Pulse for similar reasons. Tony Stenning, chief executive of Atlantic House Investments, says: “The partnership allows us to demonstrate to women from a variety of backgrounds that numerous career opportunities exist for them within financial services. It is one part of our commitment to continue improving D&I both within our firm and the wider industry.”
The importance of role models and sustainability
Equally, there are an increasing range of good role models today. Young women can see women in senior positions and aspire to achieve the same. “Having enough role models is vitally important – they allow people to dream. There are plenty in politics, in the central banks. I don’t remember a time when there were so many senior women taking important decisions,” says Altinger.
The sustainability agenda may also prove important in convincing a new generation of women that finance is ‘their thing’, rather than the profit-led, short-term, ego-driven reputation the City has attracted to date.
“Sustainability goes hand in hand with diversity. It should help differentiate investment management from areas such as investment banking,” says Jackson.
Shah adds: “Women have always been involved in sustainability and there has been cross over into asset management for a practical reason; it pays more and it can have a direct impact.” The idea that capital can be a powerful force for change is starting to have resonance.
Altinger believes it may be a fertile source of the next generation of asset management leaders as ESG considerations become as important as financial consideration when managing assets.
Holding on to talent
As the pandemic has shown, there is also a significant challenge not just in recruiting female talent, but also retaining that talent. Too often, women will find that the much-promised flexibility does not materialise.
Shah says it is vitally important to ensure the culture of the organisation is set up to optimise the talent or it will go elsewhere: “This means investing in the attraction of talent, through improved job adverts and equitable hiring practices, and in the retention of talent, through development, sponsorship and championing of diversity.”
For Jackson, a useful step would be to equalise maternity and paternity leave. That way, when companies are thinking about compensation, promotion or hiring, younger women aren’t at an automatic disadvantage.
Altinger would like JOHCM to embrace a D&I framework. “I think companies approach it piecemeal. They look at implementing certain policies. They look at doing respectful behaviour training for staff or unconscious bias training, plus a few podcasts and webcasts and that’s it. That really won’t move the dial.”
The asset management industry has undoubtedly made progress. However, it has some way to go on gender pay and bringing women into senior roles. The industry appears to recognise the problem, but it will need to be bolder in finding solutions.
This article first appeared in ESG Clarity’s sister publication Portfolio Adviser.