The Problem with Women in Business and in Fund Management

The UK Government’s Treasury Department has recently launched a review into barriers for women in business. When I wrote my book about women entrepreneurs, ‘Our Turn’ sponsored by the then Bank of Scotland, little did I know just how many advantages men have thanks to women (and other men blocking women).

Some of the key blockages included, according to research, relative to men, a more realistic sense of success. Men in their cliched bravado tended to be more self confident of their own abilities, (self-attribution bias), and so underestimated the chances of failure and went gung-ho into business.

You’re already familiar with these issues affecting women in the workplace. You are willing to work longer for the same pay as a man, research proves it. Thank you. It makes it easier to pick a man to promote – heck I’m hardly about to move someone up who works the longest hours am I to do the same work?

And it’s unfortunate because the world needs more women entrepreneurs than ever. It needs more women in business because statistically they are more likely to succeed. It needs more women running top companies FTSE companies, because statistically their share prices do better. It needs more women at heads of Government, because statistically it leads to less wars. It needs more women managing household finances, because statistically it leads to less personal insolvencies.

Other obstacles, and research suggests clichés exist out of reality and experience:

Women, underpaid for the same work as men, earning less by the same age, had fewer resources with which to take the leap, and so less likely to take the leap.

Of course, there is the baby factor, lack of affordable nursery care is well documented, but there is also that fewer women want to go back to work full-time and there the part-time do it from home type of entrepreneurial ventures are less well taught, known about – compared to the office or WeWork based entrepreneurial start up – which again to women with small children may not be suitable.

The role models, reported by some women in our book, were hardened, angry, that they could do it, so why all the whinging – in other words, the sisterhood is sorely lacking other than to self-promote not to hand up others.

Consequently, by self-selecting gender specific role models, they may be accidentally restricting their chances of success.

What of bias in capital availability? Bias in venture capital is well known, and don’t doubt that just as employers think ‘when will you get pregnant’ so do investors.

What is to be done? One thing is greater education of entrepreneurial ventures which can be born from home to a significant size, without massive capital and full-time away from home requirements. Thanks to the internet they exist.

But that is one of many options I will speak to the Treasury about.

Incidentally, I wrote the book, ‘Our Turn’, because when I co-founded the entrepreneur mentoring organisation ‘TiE – The Indus Entrepreneurs’ UK there were hardly any women in the organisation – a fault which was ours, soon remedied, not theirs. Yes, it’s a team effort. If you want more women entrepreneurs, work with the men good at it too.

Women in Business

There can be little doubt about male dominance when only one out of a hundred of the UK’s largest companies are headed by a woman. Even in the US, it’s a similar proportion of women who head Fortune 500 companies.

Eighty per cent of women-owned businesses that need credit are under-served worldwide, creating a ￡1.3 trillion financing gap according to research last week. Also according to the Rose Review “only 13pc of people on UK investment teams are women and 48pc of investment teams have no women at all. This is reflected in the fact that less than 1pc of UK venture funding goes to all-female teams and just 4pc of deals.”

Not only does research show women run business do better, but also those with a more gender balanced board – basically on every metric it makes sense investing in women. But it doesn’t happen. So women have started their own funds, their own investor groups to invest in women led businesses.

How ironic. Research shows 46 per cent of all US businesses are owned by women, and employment at women-owned businesses is growing at 18 per cent, compared with 8 per cent for all companies, according to business magazine Forbes. Actually, US women have an average net worth of ￡1.96 billion compared with the men, at ￡1.45 billion.

Women in Investing

And when it comes to investment, research also shows women make better investors than men. Women’s portfolios earned 1.4% annually more than men’s did in a study of over 35,000 investors by the University of California at Davis. Indeed, single women earned 2.3% annually more than single men.

Poor male performance is due to over-trading, according to the study. Men trade their accounts 45% more often than women. And single men shuffle their holdings 67% more than single women. Perhaps the adage about men’s fear of commitment is true after all.

A National Association of Investors Corporation ten-year study found all-female investment clubs outpaced all-male investment clubs by producing 23.8% average compounded lifetime annual returns compared to 19.2% for male clubs.

So what lessons are there for men? Fear of making a mistake was 50% to 60% higher among women than among males according to the US National Center for Women & Retirement Research. Consequently, women spend 40% more time than men researching and are also less likely to trade on a ‘hot tip’. Men need to reign in their overconfidence. 52% of men express confidence in their ability to invest wisely, compared to just 38% of women according to the American Savings Economic Council. Men are overconfident in their abilities to pick market beating stocks.

Women Traders

Do women also make better traders? So I crowdsourced the answer to this perennial question. Who is better then (thanks Marcus Taylor) – this is what Marcus said:

“A study conducted by the University of California of 35,000 brokerage accounts has shown that women make higher returns than men, on average by 1.5 %. It even goes so far to say that single women made 2.2 % more than their single male counterparts.

· The National Association of Investors Corp in Maryland (USA) revealed in their study that all women investment clubs outperformed all male investment clubs by an average of 5 % per annum. The reason for that? Apparently, it is because women trade less often and do have less tolerance to risk than males. Catherine Eckel, Professor of Economics at Virginia Tech, also found that women’s risk tolerance in many different situations was lower compared to their male counterparts. Women usually enter trades only once their confidence level is high and this is the reason why they trade less frequently.

Terrence Odean and Brad Barber studied 35,000 accounts at a large discount brokerage company from 1991 to 1997. In their study they also concluded that men trade 45 % more frequently than women, and this over-trading contributes per year to a 2.65 % reduction in net returns compared to 1.76 % for women.

According to an article on TrackRecord Asia, there are 5 reasons that explain why women are better traders. They are more meticulous, more disciplined, more diligent, they cope better with stress and their brains are designed for macro-thinking.

In a further article Gary Belsky adds some more reasons: women are quicker to admit ignorance, they are more likely to ask for help and advice from others, they do more “homework”, they are better at specific goal-setting and (as mentioned previously) are more cautious about risk.

Last, but not least, also the trading website Fintrader outlines 5 possible reasons: men hate to be wrong and have difficulty to admit any mistakes, women are less emotional (surprised?) and able to cope better in a crisis, it’s easier for women to say “NO”, women read the manual and follow the rules and think more carefully and don’t jump in head first.”

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