While men may be paid more and are better represented in the trading workforce, women make better traders, according to new research. Joe McGrath examines the facts…
It’s official. Women are better at trading than men.
At least that’s the finding of new research undertaken by academics at the UK’s University of Leicester.
To be more specific, employing a greater number of female traders reduces the chances of a market crash and increases the regularity of positive trading returns, according to the study.
Despite the findings, the majority of trading desks continue to be dominated by male traders.
A study conducted by JM Coates in 2012 found that trading desks are 95% male and 5% female on average, following a survey of operations in the UK and the US.
Investment 2020 is an organisation founded by Henderson Global Investors’ chief executive officer Andrew Formica and JO Hambro’s former chief executive Nichola Pease. It aims to encourage recruitment from a wider talent pool in asset management.
Karis Stander is the managing director at the organisation. She says, while the figures may not make for impressive reading, there is strong evidence that the City of London – particularly asset managers – are keen to have a better balance.
She explains: “Attracting more women into the industry – not just in support functions, but in front office too – will partly address some of those issues.
“It is frustrating when you see discrepancies, but I am not a believer in going down the quota route.”
Stander says Investment 2020 has the support of the largest fund managers in the world and boasts active involvement with representatives from Legal & General, Standard Life Investments and Henderson Global Investors.
However, despite marketing the benefits of taking a role at an asset management business, women remain under-represented in both portfolio management and trading.
In trading specifically, the remuneration and bonus schemes in operation are unlikely to favour women either.
According to the University of Leicester paper: “Even though male traders may underperform female traders and make profits less often, reward schemes in financial firms may still select towards large groups of male traders.”
In other words, while female traders may do better as a group, they are still paid less than their male colleagues overall.
Female traders do indeed outperform male traders on an averaged basis, but men are more likely to “hold their nerve” during market turbulence. Men are also the outliers for abysmal performances as a result.
So, if the truly exceptional and truly horrific performers are both men do the current financial remuneration structures in operation at most banks and asset managers reward this attitude to risk taking?
The report suggests that they do, despite regulatory attempts to change this culture.
“Financial bonus schemes typically reward the best performers and often lead to large numbers of other traders being fired, potentially even those making small profits.”
Recruiters may want to consider the impact of financial incentive schemes for two reasons.
One – they may increase the potential for a catastrophic loss and increase the appeal to chase losses and two – because they may also be unfairly geared towards men.
The report concludes that “in an environment of highly selective performance-based evaluation… one would expect the population to be increasingly biased towards male traders, even though on average, they underperform.
“As such the overly male culture of financial firms may itself be driven by hormones and reward systems.
“In order to increase the number of female traders it may be necessary to fundamentally change the bonus culture of investing.”
Allianz Global Investors is one buy-side firm, which had a female chief executive until March of this year.
Elizabeth Corley’s influence in the business is clear to see in its recruitment policy, which specifically encourages a gender diverse environment.
A spokesman for Allianz GI, said: “A key focus of our work around inclusion and diversity is ‘gender parity’ and we have an ambitious global programme aimed at improving female representation in senior roles.
“Gender equality is crucial for our future business success, so it is critical we encourage women to develop their careers, focussing on female progression at all career levels.”
Allianz also has a senior female leadership programme aimed at improving gender diversity and enhancing female career development.
The spokesman explained: “These include unconscious bias training, networks that offer support to female colleagues and, ensuring transparency of promotion and recruitment processes.
“The programme is part of wider efforts to improve overall organisational diversity and promote a more inclusive culture at Allianz GI, led by our local and global Inclusion & Diversity Councils.”
But not all buy-side staff are aware that their companies promote gender equality. When The TRADE contacted BlackRock – the world’s largest asset manager – its press team was unable to immediately outline any such programmes and did not respond to a subsequent request for further details.
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