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Why Aren't There More Female Hedge Fund Managers?

Why aren’t there more women running hedge funds? The money’s good, and the lifestyle would seem to lend itself better to balancing family demands than more traditional Wall Street jobs, with less face time and greater emphasis on money-making rather than bonding on the golf-course. What’s more, research has proven that women, on average, make more prudent investors—a recent report by Rothstein Kass found that women-owned hedge funds performed better than both the S&P 500-stock index and the Global Hedge Fund Index over the last six-and-a-half years, as female investors proved more cautious and less prone to overconfidence than men.

“Women simply perceive risk differently than men and tend to manage their portfolios accordingly,” said Meredith Jones, a Rothstein Kass director, in a press release. “This results in less performance slippage, a diminished tendency to sell at the bottom, and a more consistent application of their strategies.”

Over at DealBook, Whitney Tilson, one of the more thoughtful members of the hedge fund brotherhood, makes an attempt to answer the question of why his field continues to be so male-dominated. ”If women are, in general, better suited to be successful investors, then this is a strange market inefficiency,” Tilson writes. “It would be like discovering that tall people were vastly underrepresented in the NBA. What could possibly explain this?”

An unnamed female hedge fund analyst friend offers Tilson some possibilities in his column, including the suggestion that women may naturally be more risk-averse than men, which means that their investing performance tends to be more slow-and-steady, rather than roller-coaster-like. While big investors know they should prefer the boring, reliable performance; like drug addicts, they seem to prefer their highs to be very high, even if they’re followed by very low lows.

The biggest reason Tilson’s friend offers, though, is more about supply than demand: There continue to be few women in positions on Wall Street that naturally lead to hedge fund investing jobs. This problem was exacerbated by the 2008 financial crisis, during which women were disproportionately pushed out during waves of industry layoffs. The thought was echoed by former Bank of America (BAC) and Citigroup (C) executive Sallie Krawcheck in an interview with Bloomberg TV: “What the research shows is that when we’re under periods of stress,” executives skip the diversity route and tend to hire people similar to themselves, Krawcheck said. “It’s not that we’ve even gone sideways as we have in corporate America, we’ve gone backwards.”

“It’s kind of like deciding to be an actor: Your hard work and inherent talent may not pay off for you because the odds are stacked against you, so you should do it only if you can’t imagine spending your life any other way,” Tilson’s friend told him. Maybe some women are too smart to want to make that trade.

Kolhatkar is a features editor and national correspondent for Bloomberg Businessweek. Follow her on Twitter @Sheelahk.

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