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Why the Number of Women in Finance Matters for Investors

We explore four key findings about the state of women in the investment industry.

Our study “Fund Manager by Gender: Through the Performance Lens” shows that women manage funds just as well as men, perhaps even contributing to better financial outcomes in some circumstances. A growing body of research suggests that women on corporate boards are linked to superior financial performance.

“The business case for a more diverse board and workforce is clear, and investors need better visibility on diversity performance in their portfolios,” says Libby Bernick, head of sustainability at Morningstar. “Morningstar believes it’s important to shine a spotlight on diversity and women in finance so investors can see which companies are leading and best-positioned for future growth.”

Here, we examine a few ways that the investment industry and corporate world are and aren’t progressing when it comes to the representation of women—and what this could mean for investors.

1. The Percentage of Female Fund Managers Is the Same as It Was 20 Years Ago

While smaller markets such as Hong Kong, Singapore, and Spain have a relatively high number of female fund managers, certain regions are also noticeably low (such as the United Kingdom and the United States). On the whole, women make up the exact same percentage of fund managers that they did two decades ago: 14%.

The overall underrepresentation of women as fund managers means that asset managers may not be availing themselves of a full array of talent. Consequently, investors could be missing out, particularly given what our research has suggested about the effectiveness of female fund managers.

2. Shareholder Proposals on Gender-Related Issues Had Increased Support in the 2019 Proxy Season

Our research shows that support for diversity, gender pay equity, and workplace sexual harassment proposals has risen substantially over the past five years, reaching 72%, 48%, and 41% support in 2019, respectively.

The fund families that most often supported gender-related proposals include Pimco, Fidelity, and Franklin Templeton. BlackRock and DFA/Dimensional were least likely to support such proposals.

Fund families’ stances on these issues are significant to investors because our analysis indicates corporations that effectively handle ESG issues are better able to strengthen their competitive advantage to build profitable businesses in the long term.

3. More Women on Corporate Boards may Help Corporations’ Performance

Women made up 22% of board members at U.S. companies at the end of 2018, a new high that may be due to legislation from the state of California as well as evidence that women on corporate boards contribute to better financial performance. However, because women are generally underrepresented in executive roles across the finance industry, those who are qualified to serve on boards tend to serve on more boards than men do.

The rising number of women board members shows no signs of slowing down. The trends in this area, however, are a reminder of the need for more women in high-level executive roles overall, so that there are more qualified women who’ll be able to fulfill these duties on a larger scale.

4. More Women VCs Will Help Fund More Women-Led Startups

Startups with at least one female founder receive a disproportionately small share of venture capital—14.2% of the total VC investment in U.S. companies in 2019, according to data from Morningstar subsidiary PitchBook. Women VCs are more likely to back women-led startups, but there are fewer of them.

By increasing the number of women VCs and therefore the number of women-led startups with VC backing, the VC pool would increase its exposure to various markets and opportunities—diversity that would set it up for long-term success.

This article includes research from Morningstar’s associate director of quantitative research Madison Sargis, quantitative analyst Kathryn Wing, and director of sustainability research Jackie Cook.

Learn more about the fund families supporting gender-equity resolutions in our study.
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