Portfolio Management Gets an F in Diversity, Author Says

While solid portfolios are built on diversity, managers are overwhelmingly men.

Reviewed by: Michelle Lodge
Edited by: Michelle Lodge

With about 10% of portfolio managers being women, the industry finds itself with a female participation rate akin to that of truck drivers and mining. 

That’s according to Katrina Dudley, co-author with Ellen Carr of “Undiversified: The Big Gender Short in Investment Management,” who recently addressed a panel called "Celebrating Women's History Month: ETF Pioneers & Author of Undiversified."  

At the ownership level, the percentage of female professionals is even lower, she said.  

Women remain a minority among portfolio managers—those who are the most responsible for investing money and getting good returns—and throughout the financial services industry, despite decades of trying to achieve a greater balance between women and men employees, Dudley said.  

It starts at the beginning, as reported by McKinsey & Co., she added, when women don’t get the same advancement opportunities as their male counterparts, and it carries on throughout their careers when, on average, according to a Salesforce report, it takes women 12 months longer than men to get a promotion.  

“Portfolio management 101 is all about diversity,” said Dudley, “but there is limited diversity in the ranks of portfolio managers.”  

Female participation rates have widened and narrowed in recent years, dropping from around 14% several decades ago, according to a 2021 Investment News article. That article also said the U.S. trails the rest of the world, where about 14% of portfolio managers are women. 

And rates of success appear to not vary by gender, Morningstar reported in 2018, based on a study that concluded, “We do not find a performance difference based on a fund manager's gender.” Differences also weren’t found when management teams were mixed by gender. 

Gender Breakdown 

Other industries, such as accounting, auditing and medicine have different gender breakdowns. Some 60% in accounting and auditing are female, whereas women represent only 20% of upper management. Starting out, diversity is widespread in the medical profession, yet more women go into pediatrics, which pays less, than into surgery, where men dominate and are generously rewarded. 

While conducting research for the book, Dudley said that she and her co-author noticed what is called the “30% hurdle,” in which when a group diversifies its makeup beyond 30% of one gender or ethnic group, performance initially declines. Once the newly configured group learns to work together, performance then rises and consistently does better. 

Work/life balance has often been reported as one reason women don’t thrive at work. Not an issue, said Dudley: A 2016 CFA Institute study found that a majority of men and women (66% and 63%, respectively) maintained that it wasn’t difficult to take time off when working in investment management.  

Of the 50 women the authors interviewed for the book, not one mentioned work/life balance as a roadblock to success, Dudley said. 


Follow Michelle Lodge on Twitter @lodgemich  

Michelle Lodge is a journalist who is a contributor to many sites: Fortune, Money, Time, Barron’s, Investopedia, CNBC.com and Bloomberg.com.