Women’s Role in PE & Hedge Funds Reaching “Tipping Point” – Report

Alternative investment industry events are one of the few places outside of certain sporting events where you are more likely to see a line outside the men’s room than the ladies’ room. However, slowly, and some would argue almost imperceptibly, women in the industry are gaining more traction.

So reads the introduction to the second annual survey of women in the alternative investment industry, published today by Rothstein Kass, a provider of accounting and compliance services to the sector. The survey, carried out in September and October, included input from 366 women in senior positions in the hedge fund, private equity and venture capital industries.

One of the survey’s most striking findings was that women-owned or managed firms it tracked outperformed industry averages by a wide margin. Overall, researchers found that firms included in its  Rothstein Kass Women in Alternative Investments  (WAI) Hedge Index (a group of 67 funds with women owners), posted a net return of 8.95% in the first three quarters of 2012. By comparison, the HFRX Global Hedge Fund Index generated a 2.7% net return over the same period.

While there’s no clear consensus on why women-owned hedge funds outperformed, the numbers do seem to support recent studies that “show women investors to be more risk averse, and therefore potentially better able to escape market downturns and volatility,” said Meredith Jones, director at Rothstein Kass.

That said, outperformance is relative. While the WAI outperformed the broader hedge fund industry, returns were still well below the S&P 500, which gained 16.4% in the first three quarters of the year. However, hedge funds do tend to lag the broad market when the market is up, researchers noted, due to their reliance on hedged components. Researchers said they did not have sufficient performance data to construct comparable indexes for women-owned firms in the private equity and venture industries.

The survey found that women fill a variety of leadership roles within alternative investment firms. However, it’s far more common to see women in operations, financial or compliance positions than as investment managers or chief executives. The highest percentage of women in C-level jobs were within the operational space at 35%, followed closely by C-level compliance and financial positions at 34% and 32%, respectively. The percentage of women CEOs and CIOs averaged less than 20% within the firms polled.

Respondents cited two primary reasons for the shortage of women in the alternative investment industry: a lack of available positions in the industry where a woman can develop a track record and a lack of motivation among women to enter or stay in the industry.

Nearly two-thirds of our respondents said they believe that being a woman makes it more difficult to succeed in the alternative investment industry. At the same time, however, the majority of respondents (59%) expect that there will be more women in the alternative investment industry in 2013 and beyond.

Rothstein Kass says one reason to expect an increasing role for women in the alternative investment industry is mounting investor demand. In 2012, the firms says it saw a number of women- and minority-owned requests for proposals (RFPs) issued by institutional investors, including the Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund of Chicago and the Connecticut Horizon Fund.  The New York City Retirement Systems, meanwhile, voted to increase allocations to diversity-qualified asset management firms by $500 million.

For a relatively nascent movement, Rothstein Kass says, “those numbers can start to add up quickly.”

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