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Women in Alternative Investments: 'Leveraging Diverse Perspectives'

“With change happening at an unprecedented pace, it is fitting that alternative investment firms are strategically focused on leveraging diverse perspectives in these disruptive times,” says KPMG Chairman and CEO Lynne Doughtie, “The Call to Act,” a new paper that looks at the roles of women in the alternative investment industry.    

This year’s report draws on a broader survey than did its precursors (going back to 2011). The new survey had 886 respondents, men and women within the industry, both management and investment. KPMG makes use of a broad definition of “alternatives,” so that respondents come from hedge funds, private equity, venture capital, and real estate.

The co-authors of the report, Camille Asaro and Kelly Rau, say that a call to change is coming from investors, and that managers are stepping up. They quote Eileen Murray, a co-CEO of Bridgewater Associates, who says, “The percentage of women in senior positions has increased from 0.5% when I started working to now 15-17%.” Murray says she isn’t sure whether these numbers should make her “do the happy dance or cry.”

A Gender Gap

The numbers from the survey indicate that both man and women see diversity as important, although men are more likely than women to believe that their own firm, or their sector, is at present doing what needs to be done to advance that goal. Nearly two thirds of the men asked (65%) believe that their management team sees diversity as an important part of business strategy. Among women, that number drops to 50%.

Looking at the negative side of what one may consider the same question, 48% of the women respondents say that their firm is “not doing enough to recruit, retain, or advance women.” Only 30% of men said the same thing.

Asaro and Rau suggest an explanation for the difference, “[M]en may be more willing to assume that because a diversity commitment is made or a policy is in place, it must be helping.” Women, on the other hand, question when a firm’s “stated commitment” is window dressing.

Institutional Investors

The report discusses how investors, especially institutional investors, are pressing the firms that manage the funds in their portfolio in the direction of diversity. On this point the authors quote Kathryn Graham, head of strategy coordination, Universities Superannuation Scheme LTD, a pension system in the UK with more than?50 billion in assets under management. “Many European institutional investors have been very focused on [environmental, social, and governance] practices at firms in their portfolio, and I think the ESG effort in Europe is both rather sophisticated and well-established as a general matter.”

That observation reflects the broad fact that among Europe’s institutional investors, the issue of gender diversity is considered a subset of ESG rather than a stand-alone concern.

Among US investors, KPMG’s report quotes Dana Johns, senior portfolio manager, Maryland Retirement and Pension System, who says that investors need to talk to fund managers, and the talk ought not be philosophical, but a prompt to action. “If we want this industry to evolve, we need to raise the level of discourse from talking about it to taking action.”

Whether diversity is stand-alone or working from a pre-established pre-existing platform, the point as Asaro and Rau see it is that institutional investors expect that improved corporate governance will better protect and ensure their returns for their stakeholders.

Getting Managers to Measure

But it doesn’t follow that there ought to be an express or implied threat here: that investors ought to be saying to managers, ‘either diversify your ranks or liquidate our stake in your products!’ Asaro and Rau quote Theresa Whitmarsh, of the Washington State Investment Board, “We wouldn’t have a PE program if we made gender diversity a prerequisite of our investments. We want to incentivize firms to have diversity as an objective, not punish them if they haven’t achieved it yet.”

By way of moving funds in this direction, Whitmarsh suggests, “what gets measured gets managed.” If alternative investment firms can be persuaded to measure and report the pertinent numbers, then the numbers will shift.