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The Plight of Female Alt-Fund Managers

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A report released Thursday by KPMG found that women-owned or -managed alternative investment funds find capital raising more challenging than their male counterparts, even though they continually outperform the industry.  

Moreover, 72% of investors in the study said the biggest barrier to investing in funds owned or managed by women was the lack of supply of such funds. 

“This year’s report demonstrates that many industry professionals believe women-led funds lack investor access and visibility despite better performance than the industry,” said KPMG Audit partner Kelly Easterling, a co-author of the report, in a statement. 

“But women are not asking for special treatment; they want to be held to the same standards as their peers, whether male or female.”

KPMG conducted an online poll in March and April with 328 female respondents, including fund managers and other professionals, investors and service providers in the alternative investment sector.

The report also includes a new index created by Hedge Fund Research. The HFRI Women Index tracks women-owned and -managed funds and firms and how they perform against the overall hedge fund industry. 

From January 2007 through June 2015, the annualized returns of this index were 5.6%, compared with 3.8% for the HFRI Fund Weighted Composite Index and minus 0.4% for the HFRX Global Hedge Fund Index.

In addition, the report said diverse private equity funds — firms where 50% or more of owners or investment professionals were ethnic minorities or women — frequently exceeded the returns of the broader private equity market.

The survey examined the effect that mandates might have on women-owned and -managed funds.

It found that one-third of investor respondents had an emerging manager program or fund and 7% of investors had mandates specifically for women-owned or managed funds.

However, those funds represented a small portion of surveyed investors’ portfolios, with two-thirds of investors saying they allocated one-tenth or less to such funds.

Forty-three percent of respondents were uncertain whether the existence of mandates would increase the demand for women-owned and -managed funds over the next 12 to 18 months. Thirty-eight percent of investors expected mandates to increase demand, compared with 31% of fund respondents with that expectation.

According to the survey, many respondents agreed that mandates provided a good opportunity to build out the pool of experienced, institutional quality managers. At the same time, a lot of them worried that outsiders may believe firms won mandates because of their female leadership, rather than because of their strong returns.

Other Findings

Women in C-level positions most often had compliance, marketing and financial roles at alternative investment funds in the survey. They represented 14% of chief executives and 21% of chief investment officers/portfolio managers.

A majority of respondents expected investment opportunities for alternatives firms to increase in the next 18 months, but also to take longer for investment positions to yield positive returns.

Over the same period, 44% of those polled expected hedge fund performance to improve, compared with 37% expecting better private equity and 34% better venture capital performance.

Capital raising was the top concern for fund respondents across sectors — more so than even core investment functions — with 88% of hedge funds and 64% of private equity venture capital professionals planning to go out cup-in-hand in the next 18 months.

Twenty-six percent of investors polled expected to increase their allocations to women-owned or -managed funds, and none to decrease them.

— Check out 7 Reasons Women Make Better Money Managers Than Men on ThinkAdvisor.