Perspectives On Diversity

While surveying nearly 1000 public markets Investment Professionals in Nov 2019-Jan 2020 about their compensation, we also asked about their perspectives on diversity. More details can be found in our Q1 2020 Diversity Report, but here are some of the key findings:

1. Gender Representation at Investment Firms 

• Respondents said that the average proportion of females at their firms is 26%
• The average proportion of women on an investment team is 11%
• This average proportion of women on an investment team varies significantly by firm size – firms over $40Bn report a 19% share of women, vs. 6% at firms with <$1Bn in assets
• There was also a marked difference according to investment strategy, as follows:

• The lower female proportion seen at Event-Driven firms is because teams running activist and merger-arb strategies tend to be smaller. As noted here, larger organizations tend to possess a greater proportion of female investors

2. Mentoring

Mentoring is recognized as a key element of talent attraction, retention and development; role-models can have a powerful effect. We discovered that only 3% of public markets investment professionals have mentors that are female (31% of investment professionals respondents say they have a mentor; the proportion of those mentors that are female is only 9%)

3. Compensation

Compensation for Junior and Mid-level Analysts did not show a gender difference; for Senior Analysts/PMs there was a difference in compensation, and compensation expectations (in both cases with women receiving 25-30% less than their male counterparts). However, it’s hard to be conclusive here given the small sample size of senior women in the industry. More work is needed here including tracking data from the firm side as well as self-reported investor data.

4. Satisfaction with Compensation

• For both genders, compensation satisfaction decreased with seniority (on a 100-point scale with 100 being “totally satisfied,” female Junior Analysts report a score of 70; female Mid-level Analysts 60; and female Senior Analysts 48)
• But in comparing the genders at the Junior and Mid-levels, female Analysts are significantly more satisfied than their male peers with their compensation. Yet those on the Senior end reported that they were less satisfied with their compensation than male peers

5. Efforts to Address Diversity

37% of respondents noted that their firms are taking proactive steps to bring women onto their investment teams. But these efforts have even broader support internally. A full 67% of respondents support efforts designed to increase representation of women and other minority groups (with 29% being neutral, and only 4% reporting that they were not supportive of these efforts).

Of all the qualitative commentary shared, these are some of the most interesting perspectives:

• “As a ‘diversity candidate’ I am skeptical of diversity efforts in our industry. Most firms pay lip service and have done nothing to change their cultures so that people who aren’t white men can succeed there. They also still overwhelmingly hire their buddies, and if they do hire a diversity candidate, that person has to do a lot more to prove they deserve to be there. I’ve been in this industry 15 years – the only thing that has changed are words.”
• “I believe hiring women for junior roles has become widespread. However, the challenge remains getting women into more senior decision-making roles.” 
• “Regarding diversity efforts, it is tougher to succeed here on the investment team’s side where hiring is a pure meritocracy. End of day, you’re going to hire whoever is going to make money regardless of sex or race, particularly at the larger LO/LS shops where racial biases are exceedingly rare (I say this as a mixed race man). The problem is that there is a shocking lack of qualified female talent. It’s easy to find qualified ethnically diverse men (e.g., me) but qualified women are rare. What’s even more interesting is that the talent funnel from the sell-side is significantly more balanced on the gender front in my experience – I could rattle off dozens of female sell-side ER contacts. That said, they’re skewed toward the more junior side and for whatever reason (usually kids/marriage), they tend to leave the industry at a higher rate than men. I guess my overarching point is that we shouldn’t judge investment teams or the industry too harshly for a lack of female representation – we’re actively trying but it’s extremely difficult.”