Women Continue Outperforming in Alternative Investments

By Melissa J. Anderson (New York City)

What’s one way to beat the market when it comes to alternative investments? According to new research by accounting firm Rothstein Kass, invest in women.

The new study, “Women in Alternative Investments: Building Momentum in 2013 and Beyond,” reports that hedge funds run by women outperformed the HFRX Global Hedge Fund Index through the third quarter of 2012, producing a net return of 8.95 percent compared to a 2.69 percent net return.

Camille Asaro, a Principal at Rothstein Kass who contributed to the report, said she wasn’t surprised by the data. “We did expect women to outperform, and that’s something that has been the case for the last five years.”

The research can only help make the case for supporting initiatives to bring more women into the industry – and interest in doing so seems to be growing, Asaro said. “I really believe there is more traction for women in the alternative investment industry. This research confirmed what we’ve been seeing first-hand, that there is currently more interest in investing in women-owned and managed funds. This interest does seem to be intensifying although not as quickly as some have anticipated.”

Anticipating Success

The study polled 366 senior women in the alternative investment industry (hedge funds, private equity, and venture capital). Among other findings, the study revealed that respondents were relatively positive about 2013. For example, 70 percent disagreed or strongly disagreed that there will be fewer opportunities for alternative investment firms moving forward.

But respondents were also cautious. Two-thirds (65 percent) agreed or strongly agreed that it will take longer this year for investment positions to yield positive returns. Nevertheless, the study continued:

“Assuming that women-owned or -controlled funds do have a better 2013, as they largely expect, the coming year could be a promising one for the hedge fund respondents in our survey. In fact, 31.6 percent of the hedge fund respondents are targeting a 10 to less than 15 percent return in 2013. An additional 19.4 percent are targeting a return of 15 percent or more for the year.”

Private equity respondents were also relatively optimistic, with almost 60 percent targeting returns of 15 percent or more, and 26.4 percent targeting returns between 10 and 15 percent. Venture capital respondents were a bit more stayed, with only 38 percent believing performance will be better in 2013 than 2012.

Emerging Manager Mandates

The study also polled respondents on their views on emerging manager mandates or diversity requirements, which require funds to invest in a certain percentage (or meet a certain dollar amount in investments) of women-run or owned funds. The vast majority of those polled (79.1 percent) said they had not received funding through such a program, and only 5 percent had (15.9 percent were unsure).

This is despite the fact that such mandates are becoming more common. The report states that Rothstein Kass has seen a rising number institutional investors seeking diversity through RFPs and other means. A few of these investors include the Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund of Chicago, the Maryland State Retirement and Pension System, the Connecticut Horizon Fund, and the New York City Retirement Systems.

The women who participated in the study seemed relatively skeptical that these mandates would serve to increase the demand for women-owned funds in the short term – the next year or year and a half. A quarter of women hedge fund respondents (25.5 percent) said they were optimistic about emerging manager requirements and 18.6 percent of private equity respondents agreed. No venture capital respondents felt emerging manger mandates would impact the demand for women-owned funds.

Asaro explained that there are many different kinds of requirements when it comes to emerging manager mandates, all of which are determined by those with the investable capital.

She says that a more powerful way to increase the number of women in alternative investments is through professional networking and outreach. She said, “We should, as women, support each other and motivate one another to stay in the industry. And we should mentor women in college to go into this field.”