Feminine investment strategies perform better

Feminine investment strategies perform better on average than masculine ones, research from Mannheim Business School finds.

Professor Alexandra Niessen-Ruenzi, Chair of Corporate Governance, and Professor Hans Peter Grüner at MBS analysed data on single-managed US domestic equity funds from 2004-2019, and compared typical strategies among male and female professional investors.

They find that both genders invest more in sectors that produce goods they are familiar with as consumers – a phenomenon known as consumption preference.

“Consumption-based investment decisions could lead to higher fund performance if managers’ familiarity with the sector gives them better access to information. However, it could lead to lower performance if their decisions instead come from a counterproductive behavioural bias,” says Niessen-Ruenzi.

According to the study, the latter case is more accurate. Fund managers who rely more on consumption preferences tend to take fewer risks and deliver lower returns.

The researchers further divide investment decisions into more masculine and feminine portfolios, depending on how they align with the average investment choices of male and female fund managers.

Both genders are capable of displaying more masculine or feminine investing behaviour, but the former is strongly correlated with lower performance.

“The positive effect of portfolio femininity on returns is consistent with theoretical work suggesting that managers investing more in female preferred sectors may benefit from higher returns due to limited productive capacity in those sectors,” says Grüner.

The researchers note that, in addition to boosting fund performance, adopting more feminine investment strategies on a wider scale could redirect capital into sectors that typically receive less capital.

For instance, achieving gender parity among professional investors — currently only 10% of US fund managers are women — would redirect more capital towards the healthcare, materials, and IT sectors, driving innovation and growth, while increasing financial constraints on the energy and finance sectors.

The study is available on SSRN via this link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5175911

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For more information, or to hear from Professor Alexandra Niessen-Ruenzi, contact Jamie Hose at BlueSky Education on jamie@bluesky-pr.com, or call +44 (0)1582 790 706.