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Oct 04, 2017

Women-led hedge funds generate better returns, reveals index

Performance comes despite female managers being underrepresented in the funds

Hedge funds run by women have generated returns double that of their male counterparts this year.

The HFRX Diversity Women Index, which pulls together the performance of hedge funds led by women, has returned 9.95 percent for the first seven months of the year. This compares with 4.81 percent for the HFRI Fund Weighted Composite Index, a broader gauge of hedge funds across all strategies and genders.

The strong performance comes despite women being underrepresented across the hedge fund and wider asset management industry.

Over the past 12 months, female hedge fund managers have returned 11.9 percent, according to the HFRX Diversity Women Index. The broader index has returned 7.05 percent.

Helena Morrissey, head of personal investing at Legal & General Investment Management and a strong advocate of more women in finance and the boardroom, concedes that the HFRX data looks at a short timeframe, but adds that other research has found women are ‘at least as good as men’ when investing.

‘We definitely need more women in fund management, because we bring slightly different approaches to analysis and risk – our diversity is complementary,’ she says.

Nicole Boyson, associate professor of finance at Northeastern University in Boston, says it’s not clear whether women are better hedge fund managers than men over the long term. ‘But we can say pretty definitively that women are not worse performers,’ she adds. Professor Boyson says female managers face ‘several disadvantages’ in the industry, including difficulty raising capital and a lack of visibility.

According to a 2015 research paper, The performance of female hedge fund managers by authors Rajesh Aggarwal and Professor Boyson, hedge funds run by women have higher failure rates than those managed by men, because female portfolio managers struggle to raise capital.

‘Surviving funds with at least one female manager have better performance than male-managed surviving funds, consistent with the idea that female managers need to perform better for their funds to survive,’ notes the study, which finds that fewer than one in 20 hedge funds employ a female portfolio manager.

Only one in 10 UK fund managers are female and only 184 of 7,000 US mutual funds are run by women. Well-known female hedge fund managers include Leda Braga, who runs Geneva-based quantitative hedge fund Systematica, Sarah Dahan at BlueMountain Capital Management in London and Grace Gu at Graham Capital in Connecticut.