How Risk and Gender Affect Fund Manager Performance

What research reveals about female fund managers

Oct 28, 2020

SMITH BRAIN TRUST – Goldman Sachs commemorated the 100th anniversary of the 19th amendment affirming a woman’s right to vote by highlighting its recent finding of women outperforming men in managing mutual funds.

The study piqued a MarketWatch columnist’s curiosity.

Wanting to know more, columnist Michael Brush reached out to Maryland Smith research professor Cristian Dezsö to talk about his “Gender composition of firms and risk-taking behavior” research. Dezsö’s research revealed strong performance by R&D-heavy companies managed by women.

This, he told columnist Michael Brush, confirms theories that “women have a management style that encourages people to speak up and exchange ideas. That seems to be important when you need creative thinking in areas like research” – including investment research. 

Those factors, Brush writes, indicate a “fascinating relationship between risk and gender” and, in the following passage, help connect the dots in “Here’s why women fund managers regularly outperform men, based on newer research.”

Below is an excerpt:

...A look at the performance of 20,000 mutual fund managers over two decades by Dezsö … concluded that women in investing don’t suffer a risk-aversion deficit. Instead, something much more interesting is going on. Dezsö accepts that women in general may be slightly more risk averse than men, as research confirms. But he questioned whether that carries over to fund managers. After all, they’re a select group who are more comfortable with risk. So, he studied the risk appetite of women in investing to find out if gender really affects risk tolerance.

He discovered this fascinating relationship between risk and gender: The more women at a fund or fund family, the more risk women are willing to take on. Why? On their own, women may feel pressure to take fewer risks because of stereotypes. “But then when they have more female colleagues, this stereotype lifts and they take more risk,” he says. The effect of women on risk appetite did not stop there. He also found that male fund managers take on more risk when more females are in the mix. Though not necessarily for noble reasons. Borrowing a conclusion from psychology research, he thinks it’s because men feel threatened when they see females taking on more risk. So, they respond by taking more risk, too.



About the Expert(s)

Cristian Dezsö

Cristian Dezső is an Associate Professor in the Logistics, Business and Public Policy department at the University of Maryland's Smith School of Business. He holds a Ph.D. in Economics and International Business from New York University's Stern School of Business, an M.A. in economics from the Central European University in Budapest, Hungary, and a B.A. in business from the "Babeș-Bolyai" University in Cluj, Romania. Prior to joining the Smith School, he was an associate with the economic consulting firm Cornerstone Research in Washington DC.

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