Professional investors are increasingly putting more time and money into researching the gender diversity profile of companies before buying into them. So the question is, should you be doing the same?
For Joanna Nash, Vice President Australian Equities at Blackrock, this is just one aspect of her research and she regularly looks at the number of women in executive roles for whether that affects company performance.
“Research shows that more gender diverse companies tend to have outperformance. We see fewer turnovers, people feel happier. So one way we
measure alpha is to look at the number of women in senior management positions,” she told Financy.
Financial institutions such as Bank of America Merrill Lynch, Vanguard Group and many others have invested in researching gender difference in share market investing, and as more comes to light diversity is playing an increasing important role in portfolio construction and the pursuit of outperformance.
“It doesn’t surprise me at all,” says UBS Asset Management head of investment strategy Tracey McNaughton. “Particularly when you know from the research that men do churn investments more and one way to combat that is to put more diversity in portfolios.
“But traditionally the [investment banking] industry has been overweight men because of the hours worked don’t attract as many women, and you will see more women on the buy side.
“Particularly in the current environment you [investors] are more susceptible to herding behaviour,” says Ms McNaughton.
Women are often said to be better long-term investors then men, whereas when it comes to confidence in trading men tend to dominate, as they are less worried about taking risk.
According to a six year study published in 2012, Credit Suisse found that companies with female board representation tended to outperform those with no women.
Such research has been added to, and debated, but as a result, gender diversity in listed companies is now considered an important consideration among research teams and recently the creators of the SHE exchange traded fund by State Street Global Investors.
It’s thought that greater gender diversity in executive ranks helps to expand perspectives, talent pools, builds a more progressive corporate image in the eyes of a consumer and leads to less staff turnover – factors that all help to feed into corporate stability.
To build on this, we asked Blackrock’s Joanna Nash for her insights into the professional investment world, including her tips to success.
“I think the three key ingredients to a successful investment is discipline, objectivity and diversification.
“Sometimes people can get caught up with a stock they fall in love with and this can often lead to poor decisions about how long to hold the stock. By having a very structured process you can avoid some of these pitfalls.
“Being mindful and remembering one of the fundamental principles of investing i.e. diversification is something that we can often unconsciously forget.”
What investment strategy is likely to do well right now?
“I think one of the investment strategies that is likely to do well are the ethical and sustainable investment strategies.
“As more investors are thinking about how their money is invested and what it is invested in, there will be greater attention to these investment strategies.
“And as more money flows in, performance will also improve. This interest is coming across all age groups of investors with the newest investors, Gen Y, being especially concerned by the environmental and social aspects of investing.
“Companies that are cognizant of these aspects tend to be better managed and higher quality companies which are the ones that tend to outperform in the long term,” says Ms Nash.