Quick Thoughts: Addressing Undiversified Risk

Risk Management

When diversification is a core principle for successful investing, what stops women from offering their talents for finance and investment careers? I discussed gender-based investment risks with Katrina Dudley, Investment Strategist and Portfolio Manager for Franklin Mutual Series. In Dudley’s and Ellen Carr’s new book, Undiversified: The Big Gender Short in Investment Management, they research and provide solutions for these risks to close gender gaps in investment, finance, and in many careers:

 

  • Many asset managers have not diversified their workforce positions, yet portfolio management requires diversification. Access to benefits from workforce diversification can improve portfolio resiliency and returns while mitigating risk.

  • We need to retain and promote women. We must resolve gender-based pay inequalities and the slower promotion rates of women. When workers apply their home-life constructs (e.g., housewife or stay-at-home mother) onto coworkers, they create biases. As managers watch for net present values (NPV) in portfolios, they should also watch for NPVs of their female peers’ careers to avoid gender-based wage and promotion disparities.
  • Undergraduates across US universities surveyed on investment and finance careers responded that a big barrier to investment and finance careers is that females are not aware of careers in investment management. Male undergraduates are 58% more likely than their female peers to consider a career in investment management.1

  • The four pillars that add diversification to finance as well as most industries:
    • Challenge investment and asset management firms to turn their data-analytics lenses inwards, use diversification fundamentals, and equalize promotions.
    • Mentor and sponsor women in meaningful ways, such as introducing women colleagues to established work networks.
    • Expand influencers at work or in education to include women. Engage more women professors, women guest speakers, and women as business leaders.
    • Capital allocators can invest with managers that diversify at both portfolio and analyst levels.

 

When companies address diversity risk and gender gaps, they innovate their decision-making, influence better decisions to beat benchmarks, mitigate all risk types, and are better community contributors. I invite you to watch my conversation with Katrina Dudley, “Quick Talks: Addressing Undiversified Risk”.

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