Women are underrepresented at all levels of the Australian investment sector, but particularly at the top.
In this blog post, we will take a closer look at the challenges faced by women in finance, take a look at why it’s often more profitable to employ female investment managers and explore ways to promote diversity and inclusion in the industry.
1. Lack of Representation
While a quarter of employees of Australian investment teams are female, not many are calling the shots. Women in finance are drastically underrepresented at higher levels of the funds management and investment industry.
Mercer performance tables have confirmed just 3% of Australian private equity and 15% of venture capital partners are female.
In the listed space, the number of female fundies domiciled in Australia has risen to 10% in 2022, up from 9% in 2020 – glacial progress as identified by Citywire’s 2022 global survey of diversity in funds management (the Alpha Female Report, published September 2022).
The number of funds run by solo female managers or all-female teams domiciled in Australia has been stuck at 5% for several years (vs. 89% for funds run by solo male managers or all-male teams).
2. The Gender Pay Gap
One of the biggest issues facing women in finance is the gender pay gap. Studies have shown that women working in finance earn less than their male counterparts, even when controlling for factors such as education and experience.
Progress on Australia’s gender pay gap stalled at 22.8% last year, with women on average earning A$26,596 ($17,279) less than men. Data for 2023 also shows little growth in women holding ASX/200 boards across the country.
3. Barriers to Entry
There are also barriers to entry that can make it difficult for women to enter the investment industry in the first place. These barriers can include a lack of mentors or role models and unconscious bias.
There are only a dozen female fundies in Australia who could act as role models for women in finance, including:
Chanel Stuart-Findlay (Plato Asset Management)
Suellen Morgan and Mary Feros (Touchstone)
The lack of representation of women in senior investment positions of course has an impact on what capital is allocated to, given our cognitive bias is to invest in things we have an innate understanding of.
But there’s wisdom in employing female investment professionals.
As it turns out, female fund managers outperform male-led firms. From 2009-2018, 69.2% of the top-quartile-scoring U.S. venture capital funds included female decision-makers, according to Fast Money. Additionally, when U.S. firms increased their number of female partners, they saw 9.7% more profitable exits and a 1.5% increase in fund returns yearly. There’s a clear pattern when women take the reins in venture capital.
Grok Ventures, the private investment company of Mike and Annie Cannon-Brookes, was quick to work out the wisdom of employing female investment professionals who could find outstanding start-ups founded or co-founded by women in finance.
Lucinda Hankin, Grok’s director of private investments, deployed 60% of dollars within Grok’s start-up portfolio into businesses with a sole female founder. That company was Brighte, a zero-interest solar and battery financing company, which became one of Grok’s most successful investments, that has to date approved over $500 million in financing across 60,000 households.
What can be done to create a more inclusive and representative investment sector?
Some simple measures to encourage women in finance include:
• Investing in emerging female fund managers and supporting their growth
• Making unbiased introductions that go beyond diversity initiatives
• Providing mentorship to foster a pipeline of successful and well-connected female partners
• Increasing visibility of women in venture capital to model the career trajectory for younger, impact-driven women entering the workforce
The move by pension funds and industry super funds to ensure that diverse fund management teams are included on recommendation lists is another factor that will support an increase in the number of female fundies running money.
Some fund management companies are backing industry initiatives such as Future Females in Finance (F3), which is designed to encourage young women to embark upon a career in financial services.
Another initiative is Future IM/Pact, which has a vision of attracting more diverse talent into front-office investment teams.
As an all- female business, Investability has a huge interest in supporting all women in finance. Speak to our Investor Relations team today to find out more about how we can help.