KvinnoKapital at Institutional Investor Institute’s Nordic Summit

Claudia and Julia would like to thank for all the support from the network’s members who participated in the closing session of the Nodic Summit, Women in Pension and Insurance. It was interesting to have some male participation in the discussions as well. For those of you who didn’t have the opportunity to attend, do have a look at the topics discussed and some of the background material.

Discussion Topics

  • There is some solid evidence that cognitive diversity tends to enhance an organization’s efficiency and decision-making process. The question is, do more women in the financial industry lead to greater cognitive diversity? Or should we go beyond gender and rather aim to attract women (and men) who think in a different way and how do we achieve that?
  • Behavioral finance research shows that women as a group exhibit some common characteristics such as higher degree of risk aversion and more focus on long-term positioning (as opposed to short-term trading). Both of these sound ideal for managing pension- and insurance portfolios. Do you agree/disagree with this statement based on your own experience?
  • ESG/SRI is one of the areas within the investment industry that seems not to have any problems attracting women. How come? Do you think there’s a danger of this important area being stamped as a “female” issue and hence being less prioritized?
  • How do we attract more bright young women to the industry? How do we help them stay on? Does networking help or do we run the risk of just joining in the “old boys’ club” mentality?
  • Countries across the world have been trying to boost women’s participation on boards for many years. In November 2015, Prime Minister Justin Trudeau gave Canada its first cabinet with equal number of men and women. In March 2015 Germany mandated a minimum of 30% female representation on boards of its largest companies by next year. A National campaign in the US called “2020 women on board” has a goal to increase the percentage of women on US company boards to 20% or greater by 2020. Are we doing enough? How could we speed the process?


On diversity in general:

Diversity of expertise confers benefits that are obvious—you would not think of building a new car without engineers, designers and quality-control experts—but what about social diversity? What good comes from diversity of race, ethnicity, gender and sexual orientation? Research has shown that social diversity in a group can cause discomfort, rougher interactions, a lack of trust, greater perceived interpersonal conflict, lower communication, less cohesion, more concern about disrespect, and other problems. So what is the upside?

The fact is that if you want to build teams or organizations capable of innovating, you need diversity. Diversity enhances creativity. It encourages the search for novel information and perspectives, leading to better decision making and problem solving. Diversity can improve the bottom line of companies and lead to unfettered discoveries and breakthrough innovations. Even simply being exposed to diversity can change the way you think. This is not just wishful thinking: it is the conclusion I draw from decades of research from organizational scientists, psychologists, sociologists, economists and demographers.

When disagreement comes from a socially different person, we are prompted to work harder. Diversity jolts us into cognitive action in ways that homogeneity simply does not. For this reason, diversity appears to lead to higher-quality scientific research.

Diversity is not only about bringing different perspectives to the table. Simply adding social diversity to a group makes people believe that differences of perspective might exist among them and that belief makes people change their behavior. Members of a homogeneous group rest somewhat assured that they will agree with one another; that they will understand one another’s perspectives and beliefs; that they will be able to easily come to a consensus. But when members of a group notice that they are socially different from one another, they change their expectations. They anticipate differences of opinion and perspective. They assume they will need to work harder to come to a consensus. This logic helps to explain both the upside and the downside of social diversity: people work harder in diverse environments both cognitively and socially. They might not like it, but the hard work can lead to better outcomes.

(How Diversity Makes Us Smarter, Scientific American 2014)

On the economic benefits of gender diversity:

The latest research from Peterson Institute for International Economics based on analysis of a global survey of 21 980 firms from 91 countries (Noland, Moran, and Kotschwar (2016) suggests that the presence of women in corporate leadership positions may improve firm performance. This correlation could reflect either the payoff to nondiscrimination or the fact that women increase a firm’s skill diversity. Past evidence on the impact of female leadership on corporate performance has however been mixed. Examining the economic performance of large US firms, Erhardt, Werbel, and Shrader (2003) and Carter et al. (2007) find that greater gender balance among corporate leaders is associated with higher stock values and greater profitability. Other research on US firms finds that mixed-gender boards outperform all-male boards (McKinsey 2012b) and that the Fortune 500 companies with the highest proportion of women on their boards performed significantly better than firms with the lowest proportion (Catalyst 2011). Accounting firm Rothstein Kass (2012) finds that hedge funds headed by women outperform hedge funds headed by men. More diverse boards have also been found to contribute positively to firm performance in Latin America (McKinsey 2013) and 3 Spain (Campbell and Mínguez-Vera 2008). Some studies find greater gender balance gains in particular sectors and circumstances.

However, even Carter et al. (2007), in their generally positive assessment of the impact of diversity on corporate performance, observe that the process through which diversity affects board performance is complex and that while some board functions may benefit from greater gender or racial diversity, others may not. Perhaps not surprisingly, some studies conclude that greater balance has a neutral or even negative impact. In a study of German companies, Lindstädt, Wolff, and Fehre (2011) find no overall relationship between female board membership and stock performance. In their study of 2,000 firms, O’Reilly and Main (2008) find no evidence that adding women to boards enhances corporate performance and conclude that such appointments are generally undertaken for normative rather than profit-seeking motives.

On women as investors/portfolio managers:

In 2001 researchers from Harvard found that certain parts of the brain were differently sized for men and women. The study found that the frontal globe, responsible for problem-solving and decision-making and the limbic cortex, responsible for regulating emotions were larger in women. In men the partial cortex which is involved in space perception and amygdala which regulate sexual and social behavior were larger. Other findings: some women may have as many as 12% more neurons than men. Men have 6.5 times more gray matter in brain than women while women have 10 times more white matter than man. As for intelligence average IQ scores are the same for women and men (Blackrock survey, Hotz).

One of the recent findings is that women are more risk averse than men when it comes to saving and investing. (i.e. BlackRock Investor Pulse on 4000 Americans). FED survey on Consumer Finances shows for example that women have lower risk investments than men, take more time to make investment decisions than men and express more concern when financial volatility increases.

Are women really more risk averse than men? If you look at risks like standing up for what’s right in the face of opposition, or taking the ethical path when there is pressure to stray than women are particularly strong here. Nichole R. Lighthall found that gender differences are amplified even further under stress. Male risk-taking tends to increase under stress, while female risk taking tends to decrease under stress. Implication: under stress, men and women working together would make smarter risk-taking decisions than either gender alone. A new breed of research studies shows that for a variety of reasons women tend to be less financially literate than man. If women are exposed to correct financial ideas and educated as their counterparts, the differences in risk taking narrows down and disappear à Skew surveys? Survey based on wrong sample?

Women-owned and –managed hedge funds have outperformed both the HFRI and HFRX composites of hedge fund performance nearly every year since 2007, the first year HFRI launched diversity indices. Since 2007, the annualized returns of the HFRI Women Index were 5.64 %, whereas the HFRI Fund Weighted Composite (FWC) Index had an annualized return of 6.57 % and the HFRX Global Hedge Fund Index of negative 0.39 %.

(Breaking Away: The Path Forward for Women in Alternatives, KPMG 2015)

State Street:  “Addressing Gender Folklore”, a survey of 864 investment professionals in 19 different countries:

On women as board members, statistics under:



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