Undiversified: The Big Gender Short in Investment Management. 2021. Ellen Carr and Katrina Dudley, CFA. Columbia University Press. Columbia Business School edition.
The authors cleverly take their title from a basic investing principle: diversification. Readers immediately think of the consequences of non-diversified investment portfolios and quickly understand the drift of the authors’ discussions of a non-diversified workplace. Ellen Carr and Katrina Dudley, CFA, are both experienced portfolio managers, assistant professor of finance, and visiting professor, respectively, at Columbia Business School. From their point of view as professionals with their fingers on the pulse of the industry, they have produced a timely study with conclusions and action plans in the form of a Money Management Manifesto which is actually a broad social mandate.
What mainly differentiates Without diversifying of other studies and articles is that it is up to date with the pandemic and proposes solutions to mitigate the imbalance in the investment management workforce. Where does the subject begin? And how do you conclude? The authors then reveal that only 10% of portfolio managers are women, and investment management firms that are majority owned by women manage less than 1% of global investable assets. They question why the culture of investment management produces an underrepresentation of women, as do some other gender-imbalanced areas, such as Silicon Valley. Carr and Dudley explain how to implement gender diversity, not only because it’s fair but also because it makes business sense. In their eyes, gender diversity can help investment management firms better respond to the twin threats of passive investment management and technological innovation. It can improve investment results.
The book starts off smartly with an overview of the active investment management industry and the roles of the portfolio manager and analyst. This summary may seem redundant to most CFA holders, which the authors acknowledge. The overview serves as a comprehensive introduction to the industry, with a particular focus on the key attributes and career opportunities of portfolio managers.
Carr and Dudley contrast financial literacy with investment literacy. Financial literacy helps light the way, providing quantitative skills that increase women’s confidence in pursuing a path in investment management. Confidence in working with numbers, a more important trait than possessing advanced quantitative skills, is, however, only one of the main personal characteristics associated with portfolio management. Among the others are intellectual curiosity, analytical ability and courage of conviction.
Next comes a diagnosis of the industry’s gender imbalance. This discussion is difficult because of the near impossibility of identifying where this imbalance begins. If a girl’s mother or aunt is a portfolio manager, that girl practically grows up knowing what the profession is all about. But not many girls do. To address this topic, the authors conducted more than 100 interviews with undergraduate and graduate students, as well as current and former industry professionals. They debunk myths such as the impossibility of achieving a balance between work and family life, the superior suitability of men for work, the lack of female role models, the requirement for intense and outstanding mathematical skills and the “wolf of Wall Street” as the archetypal investment. corporate management executive. Some facts emerged in a large survey, cited by the authors, about why women with degrees do not choose to work in investment management:
- They see it as a male-dominated profession.
- They are less likely than men to consider investing as a career.
- They know less than men about the industry and the jobs available to them.
- They have less confidence in their ability to land one of these jobs.
The authors open readers’ eyes to real-life situations where students at top graduate business schools are unfamiliar with investment management firms and their hiring practices, such as the need to prepare a well developed stock presentation. Those of us associated with CFA Institute are familiar with the CFA Institute Research Challenge and the opportunities it provides undergraduate and graduate students for research, learning, writing and presentation. The truth, however, is that very few students have access to an opportunity as exceptional as this.
Readers (regardless of gender) will enjoy the authors’ tales of their lives in the investment business and in the classroom. Both benefited from luck and, naturally, hard and cheerful work. And I especially love this quote: “Investment management is a great career, with a substantial financial upside, intellectual stimulation often lacking in financial jobs like investment banking, and in most cases, a reasonable quality of life relative to other careers.” Another key reason why few women seek investment management jobs after graduation is the shift to passive investing in stocks. The U.S. has only about 20 large investment management firms, and even the middle group is shrinking with consolidation.
Carr and Dudley’s solutions are to reverse the cycle that has relegated women to a minority within the industry:
- Few senior leaders
- Few female recruits (entry-level analysts), which depresses female retention rates
- Fewer females retained
- Fewer women than men in middle management and even fewer in senior management
The goal is to bring women closer and keep them. How will this goal be achieved? Carr and Dudley propose that the process begins with actions such as increasing the visibility of women in investment management careers, addressing existing image issues, and providing more on-ramps to careers in the industry. It also includes improving women’s investment literacy, changing hiring criteria and supporting organizations that improve the pipeline. Once women make up 30% of the field and have a recognized voice, they and their employers must face persistent challenges such as promotion delays, equal pay, equal culture, strong job creation opportunities networking and representation in the boardroom.
I was somewhat distressed to see that the organization that provided my launch into investment management over 40 years ago, the Financial Women’s Association (FWA, founded in 1956), was not mentioned at all. FWA has created extraordinary programs to introduce talented women to investment management, particularly through its Baruch College Mentoring Program (undergraduate). On a positive note, the book’s appendix highlights many newer organizations that I wasn’t aware of, such as Women in Investing.
Overall, I find Without diversifying for being captivating and a valuable reference work. I will recommend it to many colleagues, young and old, regardless of gender. The book is very useful not only for women, but also for other underrepresented groups in investment management. In addition to covering non-gender diversity in depth, it provides a unique overview of a profession that few have access to until they delve into it.
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All posts are the opinion of the author. Therefore, they should not be construed as investment advice, nor do the views expressed necessarily reflect the views of the CFA Institute or the author’s employer.
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Janet J. Mangano
