No formula that points to alpha generators
No one knows what makes someone an alpha generator and advisers and investors need to start questioning fund managers as to why their team lacks gender diversity when they have a homogenous team, according to Fidelity International and Frontier.
Speaking on a panel, Fidelity International portfolio manager, Kate Howitt, said as there was no formula to figure out whether a person would consistently outperform and in the absence of that the industry often fell to stereotypes.
“We go ‘what are the alpha generators we know in the past, what are they like? And I’ll assume that future alpha generators all look the same’ and that’s just really lazy thinking,” she said.
“The reality is we won’t get female representative at senior levels in the industry if we want them all to look like the male alpha generators that we’ve known. There’s just going to be differences in styles and that’s what diversity is all about.”
Howitt said her own personal commitment was to question her own assumptions and judgements when dealing with women in the industry and to accept that it was the numbers that mattered “not what someone looks like or how authoritative they sound and to question my own preconceptions about what a winner in this industry looks like”.
“Why aren’t we asking companies which are prone to big gender imbalances ‘let me see your stats on female participation in exec levels, and on ethnic diversity and other measures of diversity. Why don’t we have that data up front so that we can measure them?’,” she said.
“Why don’t we ask our fund managers before we ask what their performance was, how is your diversity going in your team and how are you tracking that over time – measurement is really powerful.”
Frontier principal consultant, Joey Alcock, said his firm was increasingly asking fund managers to explain why their teams were lacking in diversity and gender was a clear focus on that as it was “readily measurable”.
“Alarmingly the research that has been done shows a significant number of investment teams in Australian funds managers don’t have any senior women at all,” he said.
“It does seem like a lack of awareness of the benefits of that diversity is just not being appreciated and we are encouraging fund managers to look beyond what they’re doing to date to improve that diversity.”
On unconscious bias, Alcock said if male managers did not know their biases or did not take steps to become aware of what their female counterparts had faced, their behaviour could potentially perpetuate inequalities going forward.
“I would start to question firstly the idea that the homogenous team – everyone from the same university, thinking the same is somehow a sign that something works or is right or is stable. Increasingly for this reason we question that. Having diversity in ethnicity, cognitive function, education and gender is prized but it takes effort over a period time and repeated emphasis with fund managers and with clients to recognise the benefits of diversity within teams,” he said.
“It takes time for those performance outcomes to come through as well. The proof is in the pudding that that actually happens over a period of time and we strongly believe that.
“It’s about encouraging fund managers. When we question a fund manager about why they haven’t got any senior females in the team, the typical answer was ‘we don’t have candidates coming through for the interview process’. That’s where historically it’s ended.”
Alcock said advisers and investors could encourage those fund managers to take change that dynamic.
“They can go to universities and high schools to encourage an interest in finance and investments from the grassroots. They can support scholarships, hire within, and support education within their organisations to bring senior women into the mix,” he said.
“There’s lots of different ways to think about it. It’s a journey and takes time to convince that different is valuable but just like a portfolio in terms of different asset classes, companies you’re investing it, that diversity is powerful over time.”
Recommended for you
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
