I was nine years old when I first discovered the voice of a “Fearless Girl.” I had ventured out to one of Tuscaloosa, Alabama’s few orthodontists to be fitted with brackets for braces. My orthodontist, a man standing roughly six feet tall and weighing in somewhere between 250 and 300 pounds, and whose bedside manner could have inspired Steve Martin in Little Shop of Horrors, reclined my chair and got to work. With no shots, no happy gas, and not much of a by-your-leave, he started to ram the brackets onto my back teeth, down slightly past the gumline. It was noisy. It hurt like hell. There was blood and more than a few tears.
After finally getting them on, Dr. Ortho announced he needed to reset all of the brackets. I began to protest. Loudly. I struggled to escape the dentist chair before being pinned down by one very large knee in my practically concave chest. The process began anew and was eventually completed to his satisfaction.
At that point I shot out of the chair and squared off against the oversize orthodontist across the room. “I’m going to tell my mom,” I swore. He laughed at me and said I wouldn’t because then he would have to tell my mom that I’d been difficult. I put my hand on my nonexistent hip, gave him my fiercest look, and said, “Watch me,” before offering a single-finger wave and rapidly retreating to the waiting room.
I guess that’s one of the many reasons that State Street’s Fearless Girl statue hit home. The image of a young girl staring down a formidable and much larger foe —one with more power, long-standing credibility, and a louder voice — is one that resonates with me and with all of the Fearless Girls I know. But while State Street’s sculpture and accompanying pledge to use the power of proxy voting to encourage gender parity on boards are terrific, they also remind me how far we are from parity within the investment industry, and how little progress we’ve made thus far.
No matter where you look on the investing spectrum, women remain underrepresented. Women are most common in RIA roles, comprising just over one third (35.5 percent) of that community, but the numbers decline from there. Female certified financial planners? 23.1 percent. Institutional investors? 19 percent. Private equity senior management? 11.7 percent. Mutual fund managers? 9 percent. Venture capital investment personnel? 8 percent. Women-run hedge funds? A lowly 2.5 percent. Which I guess explains why I never have to wait in line to use the restroom at an investment conference, right?
But what makes the disparity worse is that women are a highly profitable long-term investment. During the week that brought us Fearless Girl, the resultant “hedge fund bro” statuary assault, and the gender balance debate about State Street’s own board, there was also new evidence to consider in the ever-mounting case that women make damn fine investors.
Peter Swan, Joakim Westerholm, and Wei Lu studied more than one million Finnish traders who bought and sold 28 major Finnish stocks over a period of 17 years. They found that female traders generated a 21.4 percent return on those stocks, while male traders lost a corresponding amount. The study further showed that the women bought after a stock’s price had fallen, selling (to male traders) when the price increased. The authors concluded that not only was the “buy low, sell high” approach of women more profitable in the long run but that the genders’ divergent approaches helped to stabilize the markets.
And that’s just a single study. Other reports — including ones by robo-adviser SigFig, fund tracker Morningstar, and indexer Vanguard, along with the ubiquitous academic study by finance professors Brad Barber and Terrance Odean, findings by venture capital firm First Round Capital, my own work in my book and at Rothstein Kass and Barclays Capital, and literally dozens of academic articles — have identified differentiated investing behaviors between men and women that make a strong case for a gender-diversified portfolio.
Yet, unfortunately, in an industry that prides itself on finding and exploiting every opportunity to profit, we’re doing a dreadful job when it comes to investing in the “broad market.” Whether that’s due to unconscious bias (it is), investors’ aversion to smaller and newer funds (that too), women’s probability weighting (which may make them less likely to launch funds), or a host of other factors too numerous to list here, if investors and asset management firms want to maximize profits, we simply must consider gender.
In the wake of my orthodontic showdown, I discovered that my fearlessness extended only to my ability to assert myself when necessary, not to actual dental procedures. Those brackets remained largely ignored on my molars for the next 20 years, until they became such a glaring problem that I had no choice but to find a new orthodontist who could remove them. I truly hope that the same thing doesn’t happen as the furor around Fearless Girl dies down. As investors, as money managers, and as consumers of financial advice, we need to acknowledge cognitive and behavioral alpha gaps now so we can all be flossin’ in the future.
