Why women rarely hold the top spots in hedge funds

Generous salary and juicy bonus? Check. Client meetings at private members' club? Check. Swanky Mayfair office? Check. Company maternity scheme? Maybe, we'll get back to you.

In the competition for talent, the hedge fund industry still has an edge over many other areas of finance, except, it would seem, when it comes to employing women.

Women are in the minority across the financial industry when it comes to top jobs. A Reuters analysis of regulatory filings shows the proportion is especially low among British hedge funds, most of which are private and not bound by disclosure rules.

Just seven women were hired or promoted last year as investment executives at 20 of Britain's top private hedge funds, the lowest level in at least a decade, the analysis found. They took on 82 men in that period.

Of all the places to work in hedge funds, the investment team is the most coveted. Portfolio managers or traders decide where to invest client money and are traditionally the highest-paid members of staff. Such roles are a launch pad for star managers to set up their own firms in the future, establishing the next generation of hedge funds.

In Britain, these roles are registered with the Financial Conduct Authority (FCA) under a category known as the 'CF 30' function, which also comprises senior marketing jobs.

A Reuters analysis of CF 30 filings for 76 financial firms showed hedge funds registered women at a fraction of the rate of other finance companies.

For an interactive version of the graphic showing registration rates across financial firms in Britain, click here

Hedge funds say they struggle to find women to work as portfolio managers and point out that women are better represented in other areas, including compliance and legal counsel. These are middle-office or back-office positions, rarely involved in investment calls.

People who work for or in financial services say more female candidates would emerge for trading positions if hedge funds cast the net wider for potential candidates, and offered better maternity packages and mentorships.

"Hedge funds will all say they don't get female applicants but are they even looking for them? Do they care? The data suggests no they don't," said Yasmine Chinwala of think tank New Financial.

Unlike the rest of the financial sector, where large, listed companies are now required to disclose pay gaps between men and women, and are under public pressure to have more women in senior roles, hedge funds can mostly operate below the radar.

Usually privately-owned and run by their founders, they are not the target of government drives to improve female representation in finance.

"Public scrutiny, and more specifically, mandated government-backed scrutiny … delivers results," said Chinwala. "These sectors have shown they are not going to make significant changes themselves without a big, concerted, external push."

Investing by Numbers

Three of the 20 top British hedge funds covered in the Reuters analysis commented about their record of hiring women.

"We have women represented across all functional areas of the firm as well as in senior management positions which are not covered by CF 30 registrations, which represents a small proportion of our staff," a spokeswoman for Marshall Wace said.

The firm has registered three women in the CF 30 category since 2009 compared with 40 men over the same period.

"Algebris continues to invest in women's careers, developing talent and creating the next generation of female leaders in finance," said a spokesman for the firm, which registered nine women and 24 men as a CF 30 since 2009.

Emso Asset Management said 35 percent of its employees were women and said it paid employees for the first 26 weeks of their 52 week maternity leave. It has registered nine women and 30 men as a CF 30 since 2009.

"Our diversity in employee base reflects the diversity of markets within which we make investments," Chief Operating Officer Rory McGregor said in an emailed statement.

Emso was the only one of the 20 hedge funds to comment publicly on its maternity pay.

Paid leave after becoming a parent can vary widely between firms. One portfolio manager told Reuters she had to argue her case to get paid while on maternity leave. She declined to be named for fear of damaging her career.

Valerie Kosenko, at recruitment consultant Mondrian Alpha, said maternity pay was an important consideration for a lot of women looking to work in the hedge fund industry.

"I don't think hedge funds gave a lot of thought to it at all. It's something that hedge funds can definitely improve."

The 10 largest U.S. hedge funds with a UK office - including Citadel and Millennium Management - registered slightly more women than their British counterparts, at nearly 13 percent, in 2018, according to the Reuters analysis.

A spokesman for Millennium declined to comment. Citadel did not respond to requests for comment.

CF 30 is an imperfect measure of diversity because firms can have a different interpretation of the FCA guidelines as to who should be registered.

Some firms register investor relations staff as CF 30. Women tend to be well-represented in such jobs, meaning that the CF 30 category may exaggerate the actual number of women hired or promoted to be traders.

In the decade covered by the Reuters analysis, the ratio of women employed under the CF 30 designation by 20 of the top private British hedge funds never went above 23 percent and averaged 16 percent.

Why try?

There are no comparable figures on hedge funds' portfolio manager hires in the United States, but data on U.S. firms founded in the last few years show the industry remains dominated by men. Women-led firms managed only about 3 percent of the assets in new funds launched between 2013 and 2017, according to figures from Hedge Fund Intelligence.

Jane Buchan, who spent nearly 20 years allocating money as chief executive of PAAMCO, one of the world's biggest investors in hedge funds, says female money managers have to work harder to get investors to trust them.

"Women need to outperform significantly in order to have the same asset levels as men who perform worse," said Buchan, who now runs her own fund, Martlet Asset Management.

"With this sort of outcome, which can be shown in academic studies and what many women perceive from their own interactions with investors, why try?"

Man Group, one of the few listed hedge funds, is the only UK hedge fund firm to sign up to the British government's Women in Finance Charter, which sets targets to increase female representation in the upper echelons of the City.

The London-headquartered firm is targeting 25 percent female representation in senior management roles by the end of 2020 from 22 percent last year and has introduced a number of measures to improve gender diversity, including a returners programme for women who left the industry.

It offers 18 weeks paid leave globally for new parents, male or female.

Man Group registered five women as a CF 30 last year, but that represented a re-categorisation to comply with European rules rather than new hires.

"We have concentrated on making sure internal people can meet their potential, introduced a lot of mentoring, ensured that we always consider a female candidate and looked at things that have historically slowed down hiring women," said Man's chief executive officer, Luke Ellis.

Women held 13 percent of investment management roles at Man Group globally in 2018, up from 11 percent in 2017 and 8 percent in 2013, a source familiar with the matter told Reuters.

The Sleazy Bits

Interviews with nine women who work or worked as portfolio managers in Britain and the United States, said hedge funds could be a tough sector for female investment managers. Some of them had experienced disparaging comments about their appearance or their investment abilities.

Male colleagues making unwelcome advances at female co-workers on nights-out was not an unusual occurrence, according to seven women who worked in a variety of different roles for hedge funds, including as traders.

One hedge fund reassigned the female toilet on the trading floor as a men's toilet, meaning women on the investment team had to walk to another part of the building, two of the women said.

None of the women, who requested anonymity to avoid damaging their careers, worked at the hedge funds named in this story.

Clare Flynn Levy, a former hedge fund portfolio manager who now runs her own behavioural analytics company, said women might put up with a toxic work culture for a while but ultimately they tended to leave.

"In retrospect, I think I used a combination of working very hard, laughing off the sleazy bits and occasionally putting my foot down if I felt someone had crossed a line," she said.

Kosenko, the recruitment consultant, said she has had a hard time convincing women to join hedge funds where they might be the first female on the trading floor.

But with investors increasingly considering diversity when deciding where to put their money, some hedge funds are looking to shake up their ranks. Last year, Kosenko had five meetings with hedge fund clients about hiring women. In the first few months of this year, she has had four.

"I think in general the big trend is let's grow the talent and let's go outside of what we are used to -- white males from Goldman Sachs," she said.