Who Runs Mutual Funds? Very Few Women

Posted May 4, 2018 4:08 p.m. EDT

Few reports on investing prominently feature female fund managers. There is a simple reason for that: A vast majority of investment professionals are men.

In fact, “vast majority” understates the case.

It turns out that less than 10 percent of U.S. portfolio managers at mutual funds and exchange-traded funds are women, according to Morningstar.

“We’ve been looking at this for years,” said Laura Pavlenko Lutton, head of fund research for North America Morningstar. “Women are just stuck at that number.”

Representation of women in the investing business is low by any measure — abysmally low when compared with other fields. For example, in 2015, Morningstar found that 37 percent of doctors, 33 percent of lawyers and 63 percent of accountants and auditors were women. The numbers suggest that the investment management business is in another league entirely.

How bad are the numbers for specific fund companies? With help from Morningstar and from Flowspring, an independent asset manager research firm, I tried to find out. We came up with a report card for the 25 largest mutual fund companies in the United States.

The numbers speak for themselves. As far as gender diversity goes, every company gets a failing grade.

The numbers look simple, but they weren’t easy to extract, and in some cases, they are only an approximation. That’s because American companies aren’t required to disclose the gender composition of their workforces. Without such a requirement, Morningstar and Flowspring used ingenious workarounds, which I double-checked the old-fashioned way, by directly contacting all 25 companies. I bear responsibility for the final result. Morningstar compiled data on all portfolio managers of mutual funds and exchange-traded funds for American companies. The list includes anyone designated as a portfolio manager on a fund prospectus, whether employed directly by a fund company or indirectly as a subadviser.

The researchers used an algorithm to extract obvious female names, and did biographical research to determine gender when the names weren’t clear. Warren Miller, the founder of Flowspring, filtered the data for the 25 biggest companies.

I then called and emailed the companies and gave them ample opportunity to correct the data. Most confirmed the initial findings.

In some cases, I adjusted the numbers upward when companies demonstrated persuasively that there had been a miscount. A few companies questioned the final details — which could alter their own grades by a percentage point or two — but they didn’t contest the overall results.

This exercise produced a troubling finding: Anywhere from 94 percent to 70 percent of the portfolio managers for U.S.-registered funds at the biggest companies are men.

At the company with the best record, Dodge & Cox, women represent just 30 percent of portfolio managers. The company declined to comment about its record.

It seems fair to say that none of these companies have a particularly praiseworthy record, as far as this specific gender equity metric goes. (Pay in the industry is another issue: I don’t have reliable numbers but have my suspicions.)

No fund company said it was comfortable with its gender diversity record. The biggest fund managers — including BlackRock, Vanguard, Fidelity, American Funds, T. Rowe Price and State Street Global Advisors — all said they were committed to improving their gender diversity records, and were making efforts to recruit and train women who will eventually become portfolio managers.

Marie Chandoha, chief executive of Charles Schwab Investment Management, said: “I think it is clear that our industry is in great need of a makeover. While progress has been made in recent years, we need a serious and concerted effort to bring more women and greater diversity into the asset management industry.”

Chandoha pointed out that Schwab has made progress in metrics aside from the percentage of female portfolio mangers. “While 28 percent of our portfolio managers are women, I am proud that they are managing 64 percent of our funds,” she said. And, she added, “Looking at it another way, 53 percent of our mutual fund and ETF assets are managed by a woman.”

MFS, which stood at the bottom of the list, with a mere 6 percent of female portfolio managers in its U.S.-registered funds, that it, too, was committed to improving that record.

Daniel Flaherty, an MFS spokesman, said in an email: “Beginning in 2010, MFS put in place a program to improve the diversity within its investment division, focused on recruitment, engagement and professional development. We believe we are making progress, as 25 percent of the investment division today are women, up from 12 percent in 2010; 50 percent of new hires in 2017 were women; and one-third of new hires over the last five years have been women.”

With women making up 10 percent of its portfolio managers, Fidelity falls right at the industry average, though it ranks in the bottom half of the biggest managers’ list. For the last six months, the company, headed by Abigail Johnson, a granddaughter of Fidelity’s founder, has been responding to allegations of sexual harassment, originally reported in The Wall Street Journal.

Fidelity “is very committed to gender diversity, not only among its portfolio managers, but across the entire business,” Vincent G. Loporchio, a Fidelity spokesman, said in an email. He added, “We continue building our female talent pipeline with hiring programs through undergraduate and graduate school.”

In addition to Johnson, he said, “women leaders include Kathy Murphy, who heads our personal investing business, which serves individual investors, and oversees $2 trillion in customer assets under administration, and a range of other senior-level executives.”

Vanguard pointed out that women manage some of its biggest funds, including its Standard & Poor’s 500-stock index fund, and it said that it is committed to improving its gender diversity.

Just about all of the other companies had similar comments.

So why are so few women running funds? It is clearly not because women are bad at managing money. To the contrary, in a recent, rigorous study, Morningstar demonstrated that women are every bit as good at this job as men.

Even asking this question may seem odd in 2018, but Madison Sargis, senior quantitative analyst at Morningstar, said: “In case anyone thinks we aren’t good at this, well, we wanted to put that to rest, and I think we did. We women do just fine as fund managers, when we get to run funds. The numbers demonstrate it.”

There are many possible explanations for why so few women work as fund managers. We’ve explored those questions before — my colleague M.P. Dunleavey did an extensive report on the problem last year — and will do so again. But at least now, with some numbers to look at, investors can begin to make choices.

It’s certainly possible to add gender diversity to criteria like fees, returns and risk. Some people, after all, have begun to avoid funds with holdings in companies they find objectionable, like those that make guns or engage in environmentally unsustainable or unethical practices.

Are you comfortable keeping your money in the hands of a company with exceedingly few female portfolio managers? Money talks. If investors pay attention to these statistics, we may at last see signs of progress in these gender diversity numbers a year from now.