Why so few female fund managers? It's not their performance

NEW YORK — Why is just one of every 10 managers at the helm of U.S. mutual funds a woman?

Many reasons may be behind the disparity, but researchers at Morningstar say they have disqualified one as a possibility: performance. After measuring how 11,272 funds have fared since 2003, the researchers found no big, statistically significant difference in performance between those led by men, women or teams of mixed genders.

Madison Sargis, senior quantitative analyst at Morningstar and the lead author of the report, recently talked about the numbers. Answers have been edited for length and clarity.

Q: Before you began this study, did you have any guesses on what the data would show? I had heard that women are often better investors because they tend to take less risk than men and hold onto their investments for the long term.

A: My initial hypothesis was that we wouldn't see too many differences, on a pure peer-relative performance.

I had read similar research, as to women producing better risk-adjusted outcomes and having lower portfolio turnover. I had also read some research that said men suffer from an over-confidence bias.

Some of the findings do align with that prior research. If you look at the financial crisis, that's really where we see the mixed-gender and women teams outperforming. That lends itself to that other research.

Q: Your paper highlights how bond funds run by women did better than those run by men during the financial crisis, from 2007 to 2009, when risky investments were the hardest-hit. Was the same true for other types of funds?

A: It was also in stocks, but more muted.

Q: So, do you think the stereotype that female investors tend to take less risk than their male counterparts holds water?

A: That argument, we see, correlates to some of our data in the performance study.

Q: There were also other periods where male managers were the better performers, but the overall gap doesn't seem to be that significant between the two genders.

A: When you look at average results, the difference isn't big. Depending on the portfolio, it can be one or two basis points (equal to one- or two-hundredths of a percentage point), which isn't all that different from zero.

Q: Did anything surprise you as you went through the data?

A: When we were looking at the overview of the fund industry, going back to the 90s, women have entered and exited in approximately equal numbers. But you can see huge growth in the number of men in the industry. That's something I hadn't seen in the data before.

Q: So, what do you think is the reason for why so many more fund managers are men than women?

A: The next hypothesis we would tackle is looking at education, to see if that would be an appropriate reason for the disparity. There has been some previous research talking about the pipeline (of female analysts): If we can look at their education history and their credentials, we can see how that all correlates to getting a role as a portfolio manager.

Q: In the introduction to your paper, you start with an acknowledgement that even looking at manager performance by gender is a polarizing topic. What did you mean by that exactly?

A: I've written a little about this topic before, such as looking at the types of roles that women and men have had in the industry. Women were more likely to manage passive index funds than active ones, or socially responsible funds, that kind of thing.

Some of the feedback that we got to that was: "Why does this matter?"

For us, we just hadn't dug deep into it. Morningstar had never done a performance study of this nature before. We had done it by rating but not by gender. We wanted to see if it does matter and if there were differences.