The performance of female hedge fund managers

• DOI: http://doi.org/10.1016/j.rfe.2016.02.001
• Date: 01 April 2016
• Author: Nicole M. Boyson,Rajesh Aggarwal
• Published date: 01 April 2016

The performance of female hedge fund managers☆

Rajesh Aggarwal, Nicole M. Boyson ⁎

D’Amore-McKimSchool of Business,Northeastern UniversityBoston, Boston, MA 02115,USA

abstractarticle info

Availableonline 12 February 2016 Using datafor the period 1994–2013, we examinethe return and risk-takingbehavior of hedge funds havingat

leastone female portfoliomanager and fundsthat have all femaleportfolio managers.Funds with all femaleman-

agers performno differently than all male-managedfunds and have similar risk profiles. For single-style funds,

those with mixedteams of both genders underperformmale-only funds on botha raw and risk-adjusted basis,

although mixed funds incur less risk and their Sharpe ratios do not differ. For funds of funds, both all-female

and mixed funds have similar performance to male-managed funds. We then consider the failure rate across

all fund styles. Funds with at le ast one female manager fail at higher rates, driven by dif ficulty in raising

capital—these funds are smaller a nd are less likely to be closed to new investment. Survi ving funds with at

least one female manager have better performance than male-managed surviving funds, consistent with the

idea that female managers need to perform better for their funds to survive. Yet, female-managed surviving

funds have fewer assets under management thansurviving male-managed funds. Using media mentions as a

proxy for investor interest, female-managed funds receive proportionately less attention. Our results suggest

that there are no inherent dif ferences in skill between female and male managers, bu tt hat only the best

performingfemale managers manage to survive.

© 2016 ElsevierInc. All rights reserved.

1. Introduction

The numberof female hedge fund portfoliomanagers is remarkably

small in relation to the numberof male hedge fund portfoliomanagers.

Using the Thomson–Reutershedge fund database (formerly known as

Lipper TASS) over the period 1994 –2013, we identify 439 unique

hedge funds with at least one female port folio manager. Excluding

fundswith both male and femaleportfolio managers(195 funds) leaves

244 unique funds with only femal e portfolio managers. By contrast,

there are 9081 funds with male portfoli o managers. In other words,

just 4.6%of hedge funds with identifiedportfolio managershave any fe-

male portfolio managers, while 2 .6% of hedge funds with identified

portfoliomanagers have only female portfolio managers.

1

The relativelysmall number of femalehedge fund managers is curi-

ous in itsown right. The smallnumber of female managersis even more

surprising in light of a well-known study by the RothsteinKass Institute

(2013) claiming that female hed ge fund managers outperform the

hedge fund universe in genera l: “For the six and a half years ending

June 2013, the Rothstein Kass Women in Alternative Investments

(WAI) HedgeFund Index returned 6 percent,while . . . the HFRX Global

Hedge Fund Index dropped −1.1 percen t during the same period.”

2

These results suggest that a significant source of potential alpha has

been overlooked in the financial markets.

We examine theseclaims with more comprehensivedata and con-

clude that female-only managed hedge fundsperform about the same

as male-only managed hedge funds, while taking similar amounts of

risk. This analysis includes both live and failed funds, and thus does

not condition on survival. In essence, we do not find that one gender

dominates the other when it comes to perform ance. Our sample of

female-onlymanaged hedgefunds is obviously small.We next examine

funds that employ mixed teams of f emale and male portfolio

managers—also a relatively small samp le of 195 funds. These mixed

gender teamsunderperform both female-only and male-onlymanaged

hedge funds.Important for this result, the underperformanceof mixed

teams is not driven by teams in general, as we cont rol for team-

Reviewof Financial Economics 29 (2016)23–36

☆We thank Pacific Alternativ e Asset Management Company for supporting this

research. We thank Jane Buc han, Judy Posnikoff, and the seminar audience a t

NortheasternUniversity forhelpful comments.

⁎Correspondingauthor.

E-mailaddresses: r.aggarwal@neu.edu(R. Aggarwal),n.boyson@neu.edu

(N.M.Boyson).

1

Thereare an additional5414 funds that do notprovide any identifyinginformationfor

theirportfoliomanagers, which we dropfrom the sample. For this reason,as well the usual

reasonsof self-reporting, we do not havethe full universe of hedge funds.

2

RothsteinKass Institute (2013), page 2. The WAI Indexis composed of 82 funds that

they categorizeas women-owned funds.Note that there are someimportant differences

betweenRothstein Kass'sanalysis and ours.Crucially, their studydoes not control forsur-

vivorshipbias. Next,they focus on women-ownedfunds, while we focuson funds with fe-

male portfoliomanagers. They focus on a select group of funds that they can identify as

women-owned.Weuse the TASS database and identifyevery femalemanager that the da-

tabasetracks.They focus on a six-and-half-yeartime periodrunning throughthe middle of

2013.We use a 20-year period from1994 to 2013. They focusexclusively on raw returns.

Weconsider raw returns,style-adjustedreturns, alphas,and several risk measures.We al-

so considerour results in a multivariatesetting, and assess statisticalsignificance.

http://dx.doi.org/10.1016/j.rfe.2016.02.001

1058-3300/©2016 Elsevier Inc. All rightsreserved.

Contents listsavailable at ScienceDirect

Review of Financial Economics

journal homepage: www.elsevier.com/locate/rfe