This month’s edition of FinanciElle Bookshelf ties into this week’s FinanciElle “Statements” interview.
I chose Women of the Street – Why Female Money Managers Generate Higher Returns (AND HOW YOU CAN TOO) by Meredith A. Jones.
Meredith, is also a board member of Rock The Street Wall Street, which is the organization being featured in this week’s FinanciElle “Statements” Interview.
In the first chapter of the book, a question is posed “Why should an investor care whether a money manager wears Louboutins or loafers?”
The research in the book is clear – women investors think about investing differently than men. They have inherent skills and traits that can translate into higher returns on investments.
Gender does and should matter in investing because “women collectively represent the second largest economy in the world based on earned income vs. GDP”. Women are under-represented and under-served in the finance industry. Diversity in general should matter in investing. It doesn’t make good business sense that money be managed by one group of people that look, sound, and think the same.
The Out-performance of Female Investors:
In Meredith’s 2013 study, “Women in Alternative Investments: A Marathon, Not a sprint,” The Rothstein Kass Women in Alternative Investments Hedge Fund Index (RK WAIHF Index) showed a clear pattern of significant out-performance by women-led funds.
After compiling and analyzing available research, combined with the research in Women of the Street, the book suggests that there are seven primary reasons why women make better money managers:
- less overconfidence
- differential approach to risk
- better trading behaviour
- hormonal factors
- “out of the box” thinking
- the ability to admit mistakes
- a more consistent execution strategy
The book uses 11 interviews with top-performing female money managers who invest in a variety of markets and with various investment strategies, to demonstrate how the inherent traits of women translate into long-term profits.
The goal of the book is to show both men and women how to apply the inherent skills of females to select better fund managers and/or more profitably manage their own money.
I really liked that at the beginning of each interview each money manager highlighted the key investment strategies they use.
The last chapter, “Lessons from the “Broad Market”, go through the guidelines to begin and look at creating your own returns, based on the themes that came up throughout the book:
- Get away from the crowd
- Be willing to be the first
- Be a long-term investor
- Maintain high conviction
- Remain confidence
- Continuously evaluate your investment theses (the criteria you use to identify which investments you would like to put money into)
- Regularly take a step back
- Be disciplined
- Stick to your expertise while maintaining an open mind
- Invest in people, not just fundamentals
If investors take the advice given in the book, and look for female money managers, they will notice that there is still a significant shortage in the pipeline of women investors. Another goal of the book is to provide the next generation of female money managers with virtual mentors and role models.
The book leaves women who want to manage money professionally with the following advice:
- Find a mentor
- Juggling is possible
- There’s more than one path to success
- Gender matters, but less than you think
I really enjoyed the interviews in this book and the summarized takeaways at the beginning of each. It is a very well researched book and highlights how important it is for the financial industry to have more women investors (or investors who think like women) because:
- returns are important – both individual and institutional investors need strong performance and positive returns to meet future obligations
- Lack of diversity of thought and investment approach enhances systematic financial risks
So invest “like a girl” in the “broad market”.