The asset management industry has always been a catalyst for economic growth – and a big part of this success has been in championing transformative initiatives that serve the greater good.
The sector has notably been one of the early adopters of Environmental, Social and Governance (ESG) metrics for its portfolio companies. But that being said, how does the asset management industry fair when it comes to gender diversity?
According to the International Finance Corporation (IFC), the industry is not meeting equality targets. Its 2019 study found that women only occupy 10% of senior positions in private equity and venture capital firms globally, and only 15% of these firms are gender balanced.
Despite the indisputable contribution of women to the sector, female-led enterprises collected less than 2.3% of global venture capital in 2020, which directly juxtaposes the IFC’s research into the performance of women in the asset management industry. The IFC found that 69% of top-performing funds had female general partners, while gender diverse fund management teams deliver an incremental 10-20% in net internal rate of return (IRR) compared to non-gender diverse teams.
Delving deeper, McKinsey Global Institute estimates that as much as 26%, or $28 trillion, could be added to annual global GDP in 2025 if women were to participate in the economy at an equal level as men.
Therefore, achieving gender equality is much more than a woman’s issue – it’s an economic one too.
So, the question is: how do we achieve gender equality in the asset management industry?
Unfortunately, there are several barriers preventing women from fully participating as leaders who can allocate and receive investment capital. Some barriers, such as those related to closed networks, unconscious biases, or lack of gender diversity commitments, would need the concentrated effort of the whole industry to overcome.
Investors have a key role to play in bridging the gender gap in this industry, but it is only by providing access to capital that things can change.
There’s no doubt that the industry is moving in the right direction. The G7 Development Finance Institutions have committed to inspire other DFIs to take the 2X Challenge, which encourages the private sector to invest in the world’s women. As part of this initiative, they have committed to a new $15 billion fundraising goal after securing more than double of their original $3 billion target. The Institutional Limited Partners Association (ILPA) has also launched a Diversity in Action initiative, which aims to fairly distribute capital. As of April 2021, 133 organisations joined the effort – suggesting there’s still a long way to go.
As one of the leading investor services firms, IQ-EQ wanted to contribute towards the global cause by doing one of the things it does best – fund administration – to connect female first-time fund managers to a professional network that can help them to bring their projects to life.
According to the IFC, female funders are two times more likely to invest in start-ups with one female founder, and they are three times more likely to invest in a female CEO. Using these insights, we created IQ-EQ Launchpad, a unique programme for women launching their first fund. In an effort to rebalance the prevailing gender imbalance in our industry, Launchpad provides preferential service terms, access to a global network, knowledge-sharing and a suite of services designed to overcome the specific challenges faced as a female first-time fund manager.
The asset management industry has been my playing field for the past 37 years. At the beginning of my journey in the fund management space, I would have been the last person on board for any affirmative action initiative as I was convinced that meritocracy would solve all discriminations over time. However, I later realized that we need clear action to change our industry – and create a better, fairer society. It is my sincere hope that, in the near future, such an offering will no longer be needed and that the asset management industry will become a role model for diversity and inclusion.