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It’s a woman’s world

The investment community has long been mainly the preserve of men. However, in the immortal words of Bob Dylan, ‘the times they are a changing’, and with them we bear witness to progressive developments beyond the obvious, and undoubtedly a force for good, which we would like to explore and share with you.

Let us start with the cold facts: according to the Boston Consulting Group, private wealth held by women grew from $34trn to $51trn in the 5 years from 2010 to 2015, an increase of a whopping 50%.  Further they predict the number to rise to $72trn by 2020, more than a 2-fold increase in a mere 10 years.  The drivers behind this radical rise are to be celebrated: ever increasing numbers of women in high paid roles; daughters more likely to inherit wealth from their parents than previous generations, who historically failed to treat sons and daughters equally; and finally, women being more proactive with the family finances than their mothers might have been.

Arguably more interesting is how the industry is adapting to the changing demographics.  A client’s risk assessment is a critical step towards the successful design of an individual investment portfolio, but here there is a marked difference between the sexes.  Studies reveal that men tend to be far more cavalier in their attitude towards risk, where women tend to favour more of a buy-and-hold approach, which can be viewed as more risk averse.[1]  Similarly, surveys reveal that men typically overcook their financial literacy[2], and claim to have a full understanding of financial concepts that may be beyond their grasp; whereas women tend to be more honest and understanding of their financial acumen.  A fascinating study by Terrance Odean and Brad Barber1, two of our favourite behavioural economists, concluded that women outperform men by a meaningful 1% per year, which, when compounded over many years, marks an incredible difference to wealth preservation when in the hands of women.  One reason they cited is that men are more likely to be overconfident than women, and consequently more likely to execute unprofitable trades.  Another reason is that women tend to be more goals oriented than men at a specific level: target retirement date, or a particular holiday home in mind. Provided they are on their way to achieving these goals they are satisfied.  Men, by contrast, tend to be more motivated to outperform the markets, which can lead to poor decision making.  Or to put it another way, in a world historically dominated by men, it could be that testosterone has been the limiting factor.

Another interesting shift has been towards sustainable investing, that is investing not just to maximise financial returns, but also with an eye towards environmental and social goals.  In a recent Morgan Stanley study[3], 83% of women questioned were interested in sustainable investing, compared to 67% of men.  Among couples interviewed, investing sustainably was typically the wife’s idea.  Interestingly, while women who inherited wealth tended to be less confident in how to execute an investment strategy, they tended to be trailblazers in investing according to a values framework, which in and of itself is not without risk.  At MASECO we have been running a range of sustainable portfolios for some five years or more, and fully support those that are interested in voting with their investment feet, so to speak.  However, the latest trend is towards investing with a gender lens, that is to score corporates on gender related issues, for example, the proportion of women that sit on the board or occupy senior positions within the organisation, and then to overweight and underweight the best and worst performers accordingly.  Unsurprisingly it is female investors that are driving this trend.  It is just possible that there could even be something of a gender premium in that companies who are better organised on the gender front may be better managed generally and could in turn offer better returns to investors.  It is early days, and the jury is currently out, but certainly one to watch for the future.

At MASECO we are yet to explore investing with a gender lens at a meaningful level.  However, we strongly support gender equality, and celebrate the rapid rise of female wealth.  I’m sure Bob Dylan would raise a glass to that!

[1] ‘Boys will be boys: Gender, overconfidence, and common stock investment’, November 1998, Brad M. Barber and Terrance Odean

[2] ‘The power of money’, Gender and investing, The Economist, March 2018 http://ow.ly/rd8H30nbMZ2

[3] ‘Sustainable Signals: New Data from the Individual Investor’ August 2017, Morgan Stanley, Institute for Sustainable Investing

Risk Warnings and Important Information

The value of investments can fall as well as rise. You may not get back what you invest. Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value.

MASECO LLP is authorised and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and is an SEC Registered Investment Adviser in the USA. MASECO LLP trades as MASECO Private Wealth. It is a limited liability partnership registered in England and Wales and has its registered office at Burleigh House, 357 Strand, London, WC2R 0HS. This document does not constitute and should not be construed as investment or any other advice. The information contained herein is provided for information purposes only and is subject to copyright with all rights reserved.


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