401k Fail: Why Are Women Underrepresented, Even as They Outperform?

It's a troubling reality

401k, women, out performance, menThis doesn't work.

It’s International Women’s Day, so what better time to highlight women’s performance in the asset management industry?

A disturbing reality is that men account for a disproportionately large number of players when it comes to mutual fund management. Up to 90 percent of portfolio managers are male.

And it begs the question: why?

New research from Morningstar gets to the bottom of it—and will hopefully encourage more female involvement.

The Chicago-based firm determined women are just as good as men when it comes to actively managing funds, thereby discounting the hypothesis that females are less inclined to participate due to male outperformance.

To test whether gender influenced performance, Morningstar tracked and compared actively managed equity and fixed-income funds in the U.S. between January 2003 and September 2017.

Specifically, research focused on determining if there was a difference in performance among portfolios handled exclusively by men, exclusively by women and by mixed-gender teams of managers. There was no statistically meaningful difference in outcomes.

In fact, when it came to equity and fixed-income asset classes, funds run by all-women teams produced slightly better results.

“Since 2003, fixed-income funds run exclusively by women experienced a cumulative return that is 4.23 percent, or 0.32 percent annualized, higher than the average fund’s return in the category,” according to Morningstar. “Most of these gains came during the financial crisis and in the past three years. Notably, the study’s sample included 124 distinct fixed-income funds run by women. At the end of 2004, there was a high of 47 bond funds run by women but there has been a steady decline since then. Today, there are only 14 fixed-income funds run by women.”

And the observed decline in female participation is farther-reaching than simply bond funds. Since 1990, 1,900 active mutual-fund managing jobs have been created. Yet 85 to 90 percent have gone to men.

Morningstar emphasizes that the study is not intended to pit men against women.

Instead, it’s simply attempting to eliminate the notion that women’s lagging success within the industry could be the reasoning behind their lack of participation.

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