The authors cleverly derive their title from a fundamental principle of investing – diversification. Readers immediately think of the consequences of undiversified investment portfolios and quickly understand the drift of the authors’ discussions of an undiversified workplace. Ellen Carr And Katrina Dudley, CFA, are both seasoned portfolio managers, respectively assistant professor of finance and visiting lecturer at Columbia Business School. From their perspective as professionals with the pulse of the industry, they have put together 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 Undiversified other studies and articles is that it is fresh up to the pandemic and offers solutions to alleviate the imbalance in the investment management workforce. Where does the problem start? And how does it end? From the outset, the authors reveal that only 10% of portfolio managers are women and that management companies majority-owned by women manage less than 1% of investable assets worldwide. They wonder why the culture of investment management produces an underrepresentation of women, as some other gender-skewed regions do, such as Silicon Valley. Carr and Dudley explain how to implement gender diversity not only because it’s right, but also because it’s good for business. Gender diversity, they see, can help asset management firms better address the twin threats of passive investment management and technological innovation. It can improve investment results.
The book begins aptly 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 charterholders, which the authors acknowledge. The overview serves as a comprehensive introduction to the industry, focusing particularly on key portfolio manager attributes and career path opportunities.
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 managing investments. Confidence in working with numbers, a more important trait than possessing advanced quantitative skills, is however only one of the key personal characteristics associated with portfolio management. Others include intellectual curiosity, analytical ability and the courage of conviction.
Next comes a diagnosis of the gender imbalance in the industry. This discussion is difficult because of the near impossibility of determining where this imbalance begins. If a little girl’s mother or aunt is a portfolio manager, that girl practically grows up knowing what the profession is all about. But few girls do. To understand this question, the authors conducted more than 100 interviews with undergraduate and graduate students, as well as current and former industry practitioners. They debunk myths such as the impossibility of achieving work/life balance, the superior suitability of men for the job, the lack of female role models, the requirement for exceptional and intensive math skills, and the “Wolf of Wall Street” as an archetypical investment. management business executive. Some facts emerge from an extensive survey, cited by the authors, as to why undergraduate women are not choosing 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 path.
- They are less well informed than men about the industry and the jobs available to them.
- They are less confident in their ability to land one of these jobs.
The authors open readers’ eyes to real-life situations in which female students at top graduate business schools are unfamiliar with investment management firms and their recruiting practices, such as the need to prepare a well-developed stock market presentation . Those of us associated with the CFA Institute know the CFA Institute Research Challenge and the opportunities it offers undergraduate and graduate students for research, learning, writing, and presentation. The truth remains, however, that too few female students have access to an opportunity as exceptional as this one.
Readers (regardless of gender) will enjoy the authors’ stories of their lives in the investment industry and in the classroom. Both benefited from luck and, naturally, from hard and joyful work. And I particularly like this quote: “Investment management is a terrific career, with substantial financial rewards, intellectual stimulation often missing from cookie-cutter financial jobs like investment banking, and in most case, a reasonable quality of life compared to other careers.” Another key reason why so few women pursue investment management jobs after graduation is the shift to passive equity investing. The United States has only about 20 large investment management firms, and even the medium-sized group is shrinking due to consolidation.
Carr and Dudley’s solutions are to reverse the cycle that has relegated women to the minority within the industry:
- Few senior leaders
- Few female recruits (junior analysts), depressing female retention rates
- Fewer retained females
- Fewer women than men in middle management and even fewer in senior management
The goal is to attract and retain women. How will this goal be achieved? Carr and Dudley suggest the process begins with actions such as increasing visibility for women in investment management careers, addressing existing image issues, and providing more career on-ramps. in industry. This also includes improving women’s investment knowledge, changing recruitment 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 face persistent challenges, such as promotion backlogs, equal pay, egalitarian culture, strong networking opportunities and representation on boards of directors.
I was a little distressed that the organization that got me into investment management over 40 years ago, the Financial Women’s Association (FWA, established in 1956), was not mentioned at all. The FWA has created some amazing programs to introduce talented women into investment management, including through its Baruch College (undergraduate) mentorship program. Positively, the appendix to the book highlights many newer organizations that I was unaware of, such as Women in Investing.
Overall I find Undiversified be 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 to women but also to other groups that are underrepresented in investment management. As well as covering gender non-diversity in depth, it offers unique insight into a profession few people have access to until they dive into it.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of the CFA Institute or the author’s employer.
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