It was International Women’s Day recently, and it made me think more actively about women and investing. It’s a huge topic, both women investing their money but also women working in the investment industry, and how important and beneficial it is for both of these to continue to grow. But there are challenges and barriers women face.
The financial services industry employs over 1.1 million people across the UK directly and additionally a further 1.3 million in related professional services. It’s one of the most important sectors for the UK economy, with its £100 billion tax contribution and making up a large contribution to UK GDP (about 8%). Therefore, ensuring the sector is as open as possible for women to work in and invest in should be imperative.
The advert that caught my eye, which inspired this piece, was by UBS for International Women’s Day which said, “Women outperform men in investing by 1.8% per annum”. This statistic comes from a study conducted by Warwick Business School and carried out over a three-year time period. It was done by performance vs the FTSE 100. Men outperformed by 0.14% and women outperformed by 1.94%. Now, this isn’t the first study to show an outperformance by women. In the 1990s, the University of Berkeley showed men traded 45% more than women, but that the excessive trading reduced men’s returns by 2.65% vs women’s at 1.72%. This statistic still holds true. In 2020 Vanguard discovered men still actively trade more than women, quite significantly.
We all know investing habits and psychology play an important role in overall returns for a portfolio. For instance, even checking your portfolio more frequently has been proven to reduce returns rather than investing and looking away for a longer period of time, and it has been proven that men are more likely to check their portfolios than women. There are also trends that women follow when investing which are different from those of men. Women tend to value more ethical practices than men and generally would rather take fewer financial risks. For example, men are twice as likely to hold crypto currencies than women. Women are also more likely to align investments with their values so might be more willing to take on “social” risks. However, financial confidence and experience over time and greater knowledge of investing will increase risk tolerance, so the more women invest the less risky they will deem it.
BNY conducted a study in 2021 which showed if women invested at the same rate as men there would be an “extra $3.22 trillion of assets under management from private individuals globally” which would be a massive change to markets (for reference this is bigger than the entire UK equity market). However, many women feel misunderstood by the investment industry. In 2017 67% of female investors felt wealth managers didn’t understand their investment goals. This is a shocking statistic and one which I hope has moved on in the past 7 years. But it does support the argument for more females working in the industry.
For instance, we met with a fund manager recently and he highlighted that females generally will have a pension worth 50% less than their male counterparts at retirement. At first, I thought this was just purely due to gender pay differences which exist, but they further expanded that this would even be due to life events such as having children and going on maternity leave. During maternity leave if you take additional maternity leave beyond 40 weeks (which most women do) your employer might not have to contribute to your pension during this time depending on employment contracts. It doesn’t seem like much but when investing and using compounding this can be a big deal. Pension gaps are a major example of where some women might feel misunderstood by wealth managers.
The general consensus has been that investment propositions might need to be reimagined to tailor for the different financial circumstances faced by women. A good way of this happening is by simply having more women working within the investment industry in fund manager, wealth manager and advisor roles. The FCA data showed only 16% of advisors were women in 2022, and so there is definitely room for change. Not necessarily a direct comparison but currently at Hawksmoor 20% of investment managers and assistant investment managers are women. There are still many challenges faced by women working in the UK investment industry, many of which are highlighted in a yearly report called “Sexism in the City” produced by the House of Commons Treasury Committee which is an eye opening but interesting read.
Emily Cave
FPC2491
All charts and data sourced from FactSet
Hawksmoor Investment Management Limited is authorised and regulated by the Financial Conduct Authority (www.fca.org.uk) with its registered office at 2nd Floor Stratus House, Emperor Way, Exeter Business Park, Exeter, Devon EX1 3QS. This document does not constitute an offer or invitation to any person in respect of the securities or funds described, nor should its content be interpreted as investment or tax advice for which you should consult your independent financial adviser and or accountant. The information and opinions it contains have been compiled or arrived at from sources believed to be reliable at the time and are given in good faith, but no representation is made as to their accuracy, completeness or correctness. The editorial content is the personal opinion of Emily Cave, Trainee Research Analyst. Other opinions expressed in this document, whether in general or both on the performance of individual securities and in a wider economic context, represent the views of Hawksmoor at the time of preparation and may be subject to change. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested. Currency exchange rates may affect the value of investments.
