AIFMs and gender equality: why should funds hire women executives?

By Maryna Chernenko

Women have become a considerable force in the financial world. According to BCG’s data, they are adding $5 trillion to the global wealth pool every year at a 6.1 per cent CAGR, which is expected to accelerate to 7.2 per cent over the next two years. While this growth has outpaced market trends, analysts predict that women will control 34.2 per cent of the world’s wealth by 2023.

But even so, the long-standing problems of gender diversity and the lack of female representation in leadership remain yet unsolved, despite the favourable trends.

However, there seems to be at least some light at the end of the tunnel. In June, the negotiators of the European Parliament and EU countries agreed on a landmark bill that seeks to give a significant boost to the presence of women on corporate boards.

From June 30, 2026, the Women on Boards Directive will require all enterprises with 250 employees and above to fill at least 40 per cent of non-executive director posts or 33 per cent of all director posts with women through transparent recruitment procedures. 

For comparison, women represented a little more than 30 per cent of board members and 8.5 per cent of board chairs within the EU in October 2021. However, it’s important to note that this figure varies greatly among individual member states of the European Union.

Women in AIFM: Cyprus and Ireland Take the Lead

In light of the EU directive’s recent progress, we saw the need to study how women are represented among alternative investment fund managers (AIFM). Titled “Women in AIFM” and conducted in the summer of 2022, my team has gathered data about gender diversity at organisations that fall into the category of authorised AIFMs across four European Union countries (Cyprus, Ireland, Malta, and Luxembourg).

Based on the data we gathered, Ireland leads the way in the representation of women among AIFM top managers. The nation has the most female executives (14.5 per cent) and also ranks first in companies with women on board (70 per cent).

Interestingly, Cyprus closely follows Ireland regarding female executives (13.16 per cent) and holds the second spot in AIFMs with women on board (66.7 per cent). For comparison, the former figure is 10.6 per cent and 11.5 per cent, while the latter is 31.3 per cent and 46.6 per cent in Malta and Luxembourg, respectively.

Cyprus’ gender representation is a key highlight among all four EU nations, especially if we consider that it has by far the smallest market. For comparison, our sample included 236 companies in Luxembourg, 148 in Ireland, 67 in Malta, and only 39 in Cyprus. Furthermore, Luxembourg and Ireland were the two largest domiciles of AIFMs and UCITS, with a 26.8 per cent and 18.6 per cent market share in 2021, respectively.

Interestingly enough, while Cyprus does not have mandatory gender quotas or diversity recommendations, it still outstripped Malta and Luxembourg in terms of actual female presence in top management positions. This shows that, while some nations perform better with quotas (France, for example), others are willing to increase the representation of women among executives voluntarily. That said, the EU’s upcoming Women on Boards Directive will bring significant changes in this field, which is set to improve gender equality in the corporate world.

What Are the Benefits of Having Women on the Board?

Besides creating a fairer, more egalitarian society, gender equality comes with multiple benefits for businesses, funds, and investors.

Dow Jones VentureSource’s longitudinal study revealed that success rates were higher at businesses with three to four female (51 per cent – 54.4 per cent) executives compared to corporates with only one or two (48.7 per cent – 49.3 per cent) women on the board. On top of this, startups with five or more female executives achieved the highest success rates across all categories (61 per cent).

At the same time, according to the analysis of the First Round venture firm, companies with at least one female founder feature a 63 per cent better performance than those founded exclusively by males.

Moreover, according to Boston Consulting Group’s study, female-run startups generate 78 cents in revenue on average for every dollar of raised investment. The same figure is 60 per cent lower (31 cents) for startup firms with an all-male leadership team.

In addition to all the above, companies in the top quartile of their sectors based on the representation of female managers or executives on the board have outperformed firms in the bottom quartile by 2.5 per cent on average since the 2008 financial crisis.

In fact, according to ETMONEY’s study, female investors generated 10 per cent more average annual returns than men between 2017 and 2020. At the same time, due to being more risk-averse and disciplined, as well as less over-confident than their male counterparts, women’s behavioural and psychological traits make them effective in investment-related risk management.

And in the case of the alternative investment funds industry, corporate gender equality and proper female representation on the AIFM board translates into more thorough decisions that benefit companies’ sustainability in the long run.

The Road to a More Equal and Healthy Corporate World

As we can see from the findings presented in this material, increased presence of women in leadership has the capacity to be a catalyst for boosting the resilience and competitiveness of businesses. Therefore, we see great value in more companies worldwide investing in closing the gender diversity gap.

The increased presence of women in the AIFM sector is a clear signal of its development, and an indicator of its maturity. I find it encouraging that the topic of gender equality in finance is gaining more interest lately, and that we are seeing actual progress taking place in this regard. I am certain that, in the long term, this is the only possible way for this market to develop.

 

Maryna Chernenko is the Managing Director of UFG Capital