Rothstein Kass Study: Despite Strong Performance, Investors Slow to Allocate to Women-Owned and Managed Hedge Funds

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Female Managers Continue to Significantly Outperform

Rothstein Kass (, a leading professional services provider to the financial services industry, today announced the release of “Women in Alternative Investments: A Marathon, Not a Sprint,” the firm’s third annual report examining the performance, prospects and outlook of women in the alternative investment industry. The report includes a survey of 440 senior women in the alternative investment industry, including fund managers, investors and service providers, as well as proprietary performance analysis of women-owned or managed private equity and hedge funds.

While this year’s results showed that women continue to outperform their male counterparts, the lion’s share of investors, 73.5 percent, anticipates that their allocations to women-owned or-managed funds will remain the same in 2014. However, 24.5 percent expect allocations to increase somewhat, and 2.0 percent expect allocations to women-owned or managed funds to increase significantly. Roughly 93 percent of investors stated they had no specified mandate to invest in women-owned or managed funds.

“While the lack of an official diversity investing program does not necessarily mean that investment into women-owned and managed funds is not taking place, the pace of investments is definitely slower than many had hoped,” said Kelly Easterling, principal-in-charge of Rothstein Kass’ Walnut Creek office. “In the investment management industry, demand is almost always one of the key drivers of supply, and at the moment, investors and women-owned and-managed funds are faced with an interesting “chicken or the egg” dilemma when it comes female-led funds. The lack of women-owned and-managed funds almost precludes large-scale investments, particularly by institutional investors. On the other hand, until there is more money flowing to women-owned and-managed funds, it is unlikely that there will be a huge influx of new fund launches.”

“Lack of supply” of women-owned or-managed funds was cited as one of the most common reasons why investors do not have a specific women-owned or-managed fund investment mandates, but the survey shows that the number of women planning to launch their own funds is trending upward. In this year’s report 17.5 percent of respondents said they have a five-year career goal of managing their own fund, up from 14.2 percent in last year’s report.

The report also revealed that women-owned or-managed hedge funds continue to perform ahead of the industry benchmark. For the six and a half years ending June 2013, the Rothstein Kass Women in Alternative Investments (WAI) Hedge Fund Index returned 6 percent, while the S&P 500 gained 4.2 percent and the HFRX Global Hedge Fund Index dropped -1.1 percent during the same period. Although performance comparisons are more difficult in the private equity space, a small sample of women-owned or-managed private equity funds reported net returns of 14.8 percent in 2012, topping the Cambridge Associates LLC private equity fund index number of 13.8 percent.
“Our research shows women-owned and-managed funds continue to demonstrate strong performance during what has been a difficult period for many alternative investment funds,” said Meredith Jones, director at Rothstein Kass and head of the Rothstein Kass Institute, the firm’s industry think tank. “Women simply perceive risk differently than men and tend to manage their portfolios accordingly. This results in less performance slippage, a diminished tendency to sell at the bottom, and a more consistent application of their strategies. Over time, these traits can create a meaningful and persistent performance differential. At the end of the day, we believe this consistent outperformance will drive performance-hungry investors to increasingly allocate to women-owned and-managed funds, spurring more launches as well as hiring trends in the industry. The only real question is the timing of this trend. Based on our survey results, real progress has already taken longer than most women expected.”

More than half of those polled, 59.7 percent, believe there will be more women in the alternative investment industry in 2014 and beyond than there were in prior years. In addition, the percentage of respondents who agreed or strongly agreed that their gender makes it harder to succeed in the alternative investment industry decreased slightly to 61.3 percent from roughly two-thirds in prior years.

Other notable findings include:

  •     There is broad optimism about the opportunities available for alternative investment firms in 2014, as the majority of respondents across the demographic groups in our survey disagree or strongly disagree with the statement that there will be fewer attractive investment opportunities for alternative investment firms in 2014.
  •     Respondents are targeting above-average returns in 2014, as more than 50 percent of those polled hope to generate returns of 10 percent or more next year.
  •     Women more commonly occupy operational, financial or compliance roles within the alternative investment industry. In fact, the survey revealed that females hold the highest percentage of C-level jobs within the financial suite, at 39.7 percent, followed closely by C-level compliance and C-level operations positions, at 38.1 percent and 34.3 percent, respectively. Respondents indicated that CIO and CEO positions are held by women at 22.5 percent and 17.2 percent of the firms polled, respectively.
  •     Increased competition for deals was cited as the primary concern of private equity and venture capital investors (31.4 percent), and roughly one-third of private equity funds agreed with this sentiment. Interestingly, venture capital funds were most concerned about exit opportunities (43.7 percent) and much less concerned about competition (3.1 percent).
  •     There is no consensus on what strategies within the alternative investment industry would perform best in 2014. While long/short strategies took first place overall at 30.1 percent, responses varied widely among the various demographic groups.

For a copy of the full “Women in Alternative Investments: Women in Alternative Investments: A Marathon, Not a Sprint” report, please click here.

About Rothstein Kass:

Founded in 1959, Rothstein Kass is a premier professional services firm serving privately-held and publicly-traded companies, as well as high-net-worth individuals and families. With more than 1,000 professionals, the firm provides accounting, advisory, auditing and tax services, as well as a full array of integrated services such as litigation and forensic consulting and concierge and tax accounting to clients across industry spectrums and in all stages of development. Rothstein Kass is widely recognized as a leader in the financial services space, consistently ranking among the top CPA firms serving the Hedge Fund, Private Equity, Venture Capital, Broker Dealer and Family Office segments.

At the core of Rothstein Kass’ remarkable success is a commitment to hiring, developing and retaining employees with the same entrepreneurial spirit that permeates the sophisticated business and financial services communities the firm serves.

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Kathleen O'Toole
Rothstein Kass
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