Insight

The march of women: increasing diversity in asset management

march of women

While women make up 50% of the world’s population and earn more than $20 trillion every year globally, a gender pay gap continues to exist and is especially pervasive in the finance sector. Currently, women’s representation in the asset management industry lags behind the rest of the financial services industry, despite diversification being a core concept in asset management. This article will discuss key findings from the Goldman Sachs Asset Management (GSAM) report on the gender gap and offer considerations for investing in diversity.

Policy and practices

As discussed in our report, only 11% of US public fund managers in 2020 were women, and even though the absolute number of managers has increased, women’s representation hasn’t kept pace with the growing industry.

The private market and alternatives landscape paint a similar picture. According to Preqin, just over 20% of employees working in alternative assets were women, with the gender gap increasing over asset classes, job functions and seniority levels.

The Goldman Sachs Asset Management Alternatives Investment Manager and Selection (AIMS) team found that 84% of investment management firms have a written policy on equal employment opportunities and 76% have diversity, equality and inclusion (DE&I) periodic reviews based on compliance with that policy. It’s therefore recognised that diverse teams lead to better outcomes, despite inequality still existing.

In our findings, many managers understood the importance of DE&I, both internally on culture and externally on commercial success. Having proactive DE&I practices helps recruit, promote and retain women in the sector, and collaboration between people from different backgrounds drives higher decision-making.

Retaining internal talent through DE&I policies and procedures also results in increased client satisfaction, which is a main factor in the longevity of a business.

Leaders leading the way

The main problem with measuring diversity for asset allocators is that the data is scarce. Normalising diversity reporting can drive transparency and create opportunities for equality while holding firms accountable.

From the data we can access, the picture isn’t positive. Just 24% of employees working for institutional investors are women, and statistics from the aforementioned Preqin report show that women are more likely to be hired and promoted in institutions with less than $1 billion in assets under management.

Meanwhile, diversity in the wealth management industry has been a recognised problem for many years. Only 18% of financial advisors in 2021 were women, with leadership roles, once again, trailing behind.

Representation needs to improve for women in senior roles so firms can build a network, which is critical to hiring more women and diversifying career opportunities. The clients we represent are diverse, and our talent should be equally diverse.

As my colleague Luke Sarsfield, Global Co-Head of Goldman Sachs Asset Management said, “First and foremost, it is incumbent on men to identify, coach and most importantly sponsor women. Advocacy is what really matters and if we successfully advocate for our colleagues’ careers, we will create a more vibrant, successful organisation.”

Act now

Decades of structural and cultural issues have resulted in a gender pay gap in the asset management industry. Policies, especially metric-based ones which validate progress, can retain women in diverse roles, providing scope for upward mobility. Flexibility and promoting a work-life balance is not just a women’s issue – it’s beneficial to all employees. The main takeaway from our report is that the industry should act now:

Adopt a diversity and inclusion policy for accountability

Cultivate a supportive culture

Tap into diverse recruiting pools

Normalise diversity reporting

Outline diversity criteria in investing by setting goals

Work with external organisations to review progress

Creating equitable opportunities is not a solo endeavour and shouldn’t be treated as such. Closing gaps should be a group effort, and with the right attitudes and influence, positive outcomes can benefit everyone.

Read GSAM's 'The March of the Women' report