May 11, 2020

The challenge when asking questions is to avoid giving away what you would like the answer to be. This is because people are often tempted to provide the answer that they think you want to hear. But by asking questions in the right way, we can help ensure we get the answers we need.  With this in mind we set out to understand the degree of diversity, starting with a focus on gender diversity, amongst the key decision makers in the investment industry.


The prompt for this exercise was a recent review of two different fund managers, both of which reported a meaningful proportion of their firm as female (although still nowhere near 50%). However, on the firms’ websites the ‘firm leadership’ and ‘investment team’ sections showed an array of male faces. This does not mean that there was not a large proportion of female workers at the companies, but perhaps the wrong question was being asked. The female professionals included in the managers’ original answers work in legal, HR, compliance and senior client-facing roles, but very few to none are employed in investments. This is an example of how firms can exhibit ‘diversity dressing’.[1] Our focus is investments and we want to understand the degree of diversity among the key investment decision makers.


We need to look for the hidden figures.


We routinely ask two questions for every investment strategy on our database:


1)      Who is the portfolio manager(s)?
2)      Who are the key team members?


In other words, we ask for the key decision makers (“KDMs”), and we ask this of all fund managers for every investment strategy. This means we can assess the gender mix of the KDM team, without asking directly for a potentially dressed-up number.


The data collected as of December 1st 2019 comprised 20,040 unique individuals listed as a KDM. For each of these, we have inferred their gender[2] (we can also assess other measures of diversity, such as the country in which they work, the year they started in the industry and whether they hold a CFA/MBA designation).


The first point to make is that the headline figures are not good. Globally, we find that 12% of KDM professionals are female; of those that are also portfolio managers, the equivalent figure is 8%. This figure is not weighted by the size of assets and each professional only counts once no matter how many teams or strategies they support. Figure 1 shows how the proportion of females varies across a selection of countries (regardless of asset class), and Figure 2 shows the proportion by asset class (regardless of country).

Figure 1. Female presence in investment roles by country

Source: MercerInsight™, Mercer calculations. The total number of portfolio managers in our sample is 6,965, a subset of the total number of key decision makers in our sample, which is 20,040.


Figure 2. Female presence in investment roles by asset class


Source: MercerInsight™, Mercer calculations. The total number of portfolio managers in our sample is 6,965, a subset of the total number of key decision makers in our sample, which is 20,040.

Although the overall figures for female participation in our analysis are typically lower than in comparable surveys, other trends are consistent. For example, a greater proportion of KDMs in some Asian countries are female, which is likely to be driven by social factors and the fact that they are newer markets, established when women occupied a greater share of the labor market. At the other end of the country spectrum, we see a relatively low female participation amongst KDMs in Japan and India. We also find consistent results with other surveys on an asset-class basis: most noticeably, the low female participation in hedge funds and private equity.


On a firm basis, 63% had no women at all listed as KDMs. A firm’s ownership structure does not appear to correlate with its female representation. We also found no link between the size of a firm’s assets under management and its gender diversity.


However, one area where there is a link with gender diversity is when firms are minority- or women-owned (Figure 3). In both cases, there is still a wide range of outcomes, but the average female representation amongst KDMs for minority-owned firms, at 21.4%, is over twice that of non-minority-owned firms (9.3%). We caution against placing too much significance on this, as there are also plenty of minority-owned firms with a low level of gender diversity in their investment teams. We also note that the average size of investment teams within minority-owned firms, at 12, is smaller than that of non-minority-owned firms (52).

Figure 3. Female presence in investment roles for minority-owned and non-minority-owned firms

Source: MercerInsight™, Mercer calculations. The number of firms in our sample is 2,409. Please note that a number of firms have similar or identical levels of female representation, and that as a consequence not all firms will be visible as distinct lines in the barcode chart shown. The thickness of each line is an indication of the number of firms at each level of representation. 


A similar story emerges from the analysis of women-owned firms (Figure 4). Again, we see some evidence that female representation within investments increases when women own more of the firm. Although this link is not statistically significant, it does suggest that women-owned firms could have more gender diverse teams. That said, we also highlight that there are many firms with notable female ownership who have very low (or even zero) female participation in the investment team. It is by no means a given that women-owned firms have diverse teams.


Figure 4. Female presence in investment roles for firms with female ownership

Source: MercerInsight™, Mercer calculations. The number of firms in our sample with data provided on the level of female ownership is 392.

What are our key takeaways from this analysis?

  • It is important to understand the true level of diversity within an investment team’s KDMs. Not everything is as it first appears, and potential investors need to look beyond self-reported measures of diversity. Beware diversity dressing.
  • Although gender diversity is better in some geographical areas (particularly Asia), the overall level of gender diversity amongst KDMs within investment teams is much too low.
  • If your investment manager, or any of your other key stakeholders, appears to be lacking in diversity, ask them why. Ask them how they are addressing the issue and ask for regular updates to measure how they are improving. If there are no signs of improvement, you may want to reconsider working with them.

Mercer believes diversity, in all its forms, matters and that diverse investment teams with shared values are more likely to outperform. If an investment firm wishes to meet client objectives, be competitive and grow its business, we think it is imperative they build more diverse, inclusive teams. That is why team diversity is a key consideration within our rating process.


We want to engage and be an agent of change. We are asking questions and looking for answers, and would ask you to join us on the journey of encouraging change for the better.


This article is the second in a series on Diversity. The first (How Diversity and Culture Impact Mercer’s Manager Ratings) was published in Research Perspectives in September 2019.

[1] The concept of ‘diversity dressing’ is akin to that of ‘green washing’ in the field of sustainable investing. Both can be used to disguise the true state of affairs within an investment team or process.

[2] Our inferences are limited to a binary male/female classification of gender for the purposes of our analysis. Mercer fully recognizes the importance of an inclusive culture within any firm, including our own, and we acknowledge that there will be professionals within this sample who self-identify in a different way to this binary classification.


View our Important Notices

Michael Kinney
Michael Kinney

Asset Class Specialist, Equity Boutique

I would like to speak to a Mercer consultant.