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Hedge Funds Run By Women Continue to Profit

Alternative investment funds that have a woman at the helm are happy to leave the reckless risk to their cowboy counterparts, a new study finds.

Fund participants are learning what married men have known for some time: If you want to grow your money, hand it over to a woman.

In a new survey of the alternative investment landscape, hedge funds and other types of funds run by women are not only growing but they are outperforming similar firms run by men.

According to Rothstein Kass, the authors of "Women in Alternative Investments: Building Momentum in 2013 and Beyond," hedge funds that were owned or managed by a woman performed ahead of the industry. They’re also leading for the year-to-date through September 2012.

The Rothstein Kass Women in Alternatives Hedge Index produced a year-to-date net return through September of 8.95 percent, in comparison to the HFRX Global Hedge Fund Index, which has generated a 2.69 percent net return through September. Furthermore, over a five year period, the Rothstein Kass WAI Hedge Index outperformed both the HFRX Global Hedge Fund Index and the S&P 500.

The main reason? Women have a different appetite for risk than their male counterparts, for starters.

[Read: How One Hedge Fund Run By a Woman Handles Risk.]

"The fact that women-owned or managed hedge funds have been able to handily outperform their male counterparts is not particularly surprising," says Meredith Jones, director at Rothstein Kass in a press statement. "There have been a number of studies that show women investors to be more risk averse, and therefore potentially better able to escape market downturns and volatility. The outperformance by women-owned or managed hedge funds should make the case that investing in these types of funds is a smart business decision, rather than one that just feels good."

The report, researched and written by Rothstein Kass, a provider for the financial services industry, profiled 366 senior women in the alternative investment industry. They found that while women occupy the highest percentage of C-level jobs within the operational space, at 35.0 percent -- followed closely by C-level compliance and financial positions, at 34.0 percent and 32.0 percent, respectively -- the number of women running the funds remains quite low. Of the firms polled, fewer than 20 percent of women run or manage their own hedge funds.

Of those firms owned by women, hedge funds were the most likely to have women-owned or managed status (16.8 percent), followed by venture capital (13 percent) and private equity (12 percent).

What is holding women back from running their own hedge funds? It might be the women themselves. Along with a lack of available positions in the industry where a women can develop a track record, the report cited women’s desire. "(W)omen lacked the motivation to enter and stay in the industry," the report found.

[What’s the State of the Hedge Fund Industry for 2013? Read on.] Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio

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User Rank: Author
3/22/2013 | 1:47:07 PM
re: Hedge Funds Run By Women Continue to Profit
Women tend to be risk averse and more cautious, but there are risk-takers who are women as well. I think there should be more equality among the genders running trading floors. If there were more women CEOs running/managing trading floors, it would be interesting to see if there were fewer blow ups. On the other hand, JPM had a women CEO of the chief investment office (Ina Drew), who wasn't able to reign in the London Whale.
Melanie Rodier
Melanie Rodier,
User Rank: Author
2/25/2013 | 12:52:50 PM
re: Hedge Funds Run By Women Continue to Profit
According to studies, up to 95 percent of the decisions we make every day are made by our subconscious. Apparently the subconscious also plays a big role in financial or investment decisions too, which somewhat explains these findings - particularly since women are typically more risk-averse, therefore any subconscious, quick decisions they make are going to be less risky than men's trading decisions.
Phil Albinus
Phil Albinus,
User Rank: Author
2/21/2013 | 2:32:37 PM
re: Hedge Funds Run By Women Continue to Profit
When it comes to risk aversion I am always intrigued by Canada and Australia. Both of these countries fared very well while the rest of the world was burning down in 2008 and immediately afterwards. I'm not sure it's entirely down to gender - although there is evidence that women and men view risk very differently. I do wonder if we would have avoided the fiscal mess if more women were reading the risk dashboards.
User Rank: Moderator
2/20/2013 | 12:54:00 PM
re: Hedge Funds Run By Women Continue to Profit
Anthodonnell: Taking risky positions to do better than a competitor is what is tripping up hedge funds. More precisely, it is an over reliance on the presumed ability to avoid risk that gets managers in trouble. And at the end of the day, no one cares if your manager is more skillful if he end up driving off a cliff and loses 10%. Any investor will take a less skilled money manager who produces better returns than a highly skilled manager who thinks his skills are so great that he can avoid risk. The numbers don't lie.
User Rank: Apprentice
2/20/2013 | 3:22:45 AM
re: Hedge Funds Run By Women Continue to Profit
The point being made is reminiscent of comparisons of men and women drivers. Men, auto insurance underwriters would affirm, are more likely to get into accidents. However, this doesn't indicate women are more skilful drivers, just less risky ones. In fact, their risk aversion is likely to impede the development of skills. Men are likely to be more skilful, but to take dangerous chances. So it is likely to be in other activities.
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