Diversification is a core concept in asset management. By allocating across different asset classes and managers, investors seek to reduce market volatility and improve risk-adjusted returns. But diversification can also apply to teams managing money and allocating assets, and we believe that diversifying with women can have a multiplying effect that can potentially improve returns, attract more women to the industry, and contribute to the leadership pipeline.
Currently, women’s representation in the asset management industry lags behind the rest of financial services4. That’s a concern because we believe diverse teams lead to better outcomes. More perspectives and differentiated backgrounds can drive higher-quality decision making, improved deal sourcing, and better ability to attract and retain talent, boosting business longevity and investment performance. In our own practices and the practices of our peers in the investment industry, we think a deliberate effort to improve representation of women in investing is imperative. Goldman Sachs Asset Management is dedicated to playing an active role in closing the gender gap within asset management.
US public markets, both equity and fixed income, are among the largest in the world at $52 trillion and $46 trillion, respectively5. Public market investors have the potential to influence a significant amount of capital. Unfortunately, in 2020 just 11% of public fund managers in the US were women—a percentage that has remained roughly constant over the last decade according to Morningstar6. And despite increased focus in recent years, even mixed-gender teams are still in the minority today. Diverse investment teams represented 28% of funds and nearly 40% of assets under management in 2020. By comparison, all-men teams accounted for 70% of funds and nearly 60% of assets while all-women teams represented less than 2% of teams and less than 1% of assets. The status quo suggests that without intentional practices to address structural barriers or implicit biases, the industry will continue to skew toward men.
Exhibit 1: Women Underrepresented in Fund Management
Source: Morningstar and Goldman Sachs Asset Management. As of December 2020. For illustrative purposes only.
According to Preqin data, women represented just over 20% of employees working in alternative assets in 2020. And there is significant fall-off of women in alternatives as careers progress, with women accounting for 12% of senior roles compared to 24% at the mid-level and 32% in junior positions. Research by McKinsey suggests that attrition itself is not to blame – women leave roles at roughly the same rates as men. However, women are promoted at lower rates than men7.
Exhibit 2: Women Underrepresented in Alternatives Asset Management
Source: Preqin Pro and Goldman Sachs Asset Management. As of December 2020. For illustrative purposes only.
Diversity has also become top of mind for asset allocators, though progress has been more localized at the plan sponsor or institutional level. Moving the needle on diversity typically comes through two approaches: manager diversity and allocation diversity. For asset allocators, the former addresses diversity within the workplace while the latter focuses on promoting diversity through investments. So far, data remains scarce on both ends. We believe inclusive representation starts with having good data. Efforts to normalize diversity reporting similar to financial reporting may drive transparency and create opportunities for women, diverse, and emerging managers.
The gender gap in asset management is a result of decades of structural and cultural issues. Influential stakeholders including asset managers and allocators, as well as senior leadership and human resource departments should be at the forefront of improving diversity starting today. We think the asset management industry should ACT NOW:
Contact our team to learn more about Goldman Sachs Asset Management can help.
1 World Bank, as of February 28, 2022. https://data.worldbank.org/indicator/SP.POP.TOTL.FE.ZS
2 Frost and Sullivan, as of March 5, 2020: https://www.frost.com/news/press-releases/global-female-income-to-reach-24-trillion-in-2020-says-frost-sullivan/
3. Boston Consulting Group, as of April 9, 2020. https://www.bcg.com/publications/2020/managing-next-decade-women-wealth
4 US Bureau of Labor Statistics, as of December 2021.
5 SIFMA, as of February 2022.
6 Morningstar, as of March 16, 2021. https://www.morningstar.com/articles/1029482/the-percentage-of-us-female-fund-managers-is-exactly-where-it-was-in-2000
7 McKinsey, as of September 6, 2018. https://www.mckinsey.com/industries/financial-services/our-insights/closing-the-gap-leadership-perspectives-on-promoting-women-in-financial-services
8 Pensions & Investments, as of February 8, 2021. https://www.pionline.com/pi-1000-largest-retirement-plans/diversity-programs-change-times
9 Diverse Asset Managers Initiative, as of December 10, 2020. https://d3n8a8pro7vhmx.cloudfront.net/intentionalendowments/pages/4968/attachments/original/1607635156/DAMI_Report__Final_.pdf?1607635156
10 NABUBO-TIAA, "Study of Endowments," 2021. As of FY 2020.
11 Cerulli Associates, “U.S. Advisor Metrics 2020.”
12 Barrons, 2021 Top 100 US Financial Advisors and Top 100 RIA Firms.
Active fund manager refers to one that makes active decisions to deviate from the index.
Asset allocator refers to an investment professional responsible for managing assets across a portfolio.
Cross-asset investing refers to an investing strategy that achieves higher diversification by featuring more than one asset class in a portfolio or fund
Diversification refers to allocating capital in a way that seeks to reduce exposure to any one asset or risk.
Investment management fees refer to the cost of having an investment fund professional manager by an investment manager. In a multi-manager fund, management fees are typically paid at two levels - to the underlying fund manager and to the fund-of-fund manager.
Passive fund manager refers to one that tracks an index.
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Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk.
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