Bringing gender equality within reach in UK investment managers

Over the past decade, investment managers have committed to ESG (Environmental, Social and Governance) goals. Many of them use the 17 Sustainable Development Goals (SDGs) adopted by the United Nations in 2015 to map and track performance. Gender equality is the fifth SDG, stating a target to ensure women's full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life by 2030. 

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) recently published consultation papers on D&I and non-financial misconduct (NFM). Whilst it is currently not clear how far their proposals on D&I will be reflected in final rules, the consultation papers made clear their expectations of firms, including to develop, maintain and disclose their D&I strategies, set gender targets and report regularly¹. Even if the proposals do not make it into final rules, boards and senior leadership need to consider their D&I responsibilities and develop strategies and plans accordingly.

As it stands, UK investment managers are not currently on track to achieve gender equality by 2030. Progress has been made in certain leadership cohorts, such as emerging C-suite roles like Chief Diversity, Chief Learning, and Chief Sustainability Officers². However, women are still significantly underrepresented in positions involving profit-generating activities, including managing funds. Despite the growth of the industry over the past two decades, the percentage of female fund managers globally (and in the UK) remains disproportionately low, at 12%, with little change since 2003³. Moreover, recruitment in general has shifted from core portfolio management roles to leadership roles, such as head of credit or chief investment officer over the past five years, mainly driven by a need to improve efficiencies within investment teams or products⁴. The reduced recruitment into fund management roles has hindered progress in increasing female fund managers representation. Bottom line, there appears to be a lack of focus both on nurturing the next generation of female talent as well as on creating a transparent pathway for future female leaders, particularly in fund management roles⁵.

How does gender equality look in UK investment management?
 

Deloitte has been examining the issue of gender equity for several years through our Within Reach? research series⁶. We used data from a 2023 global study by the Deloitte Center for Financial Services to examine gender equality progress in UK investment management firms⁷.

The industry has made some progress in recent years, with the proportion of women in leadership levels growing steadily since the adoption of the UN's SDGs in 2015. Most progress has been seen in the C-suite (see Figure 1).

Looking at the six-year compound annual growth rate (CAGR), progress made by UK investment managers has tracked that of the wider UK financial services industry in terms of female representation in Senior Leadership roles (2.1%). The sector has slightly underperformed industry average growth rates in the C-Suite (5.2%). However, growth has gone into reverse in the Next Generation cohort (-0.4%). This presents a significant challenge for the sector to address. 

As of 2022, the proportion of women in the C-suite for UK investment managers was slightly above the global rate and is expected to surpass the global rate by 2031, at 20.6% compared to 18.1% (See Figure 2).

Senior leaders also follow the trend set by the C-Suite leadership cohort⁸. We further forecast that UK investment managers will continue to outpace their international counterparts, with representation increasing from 22.0% to 25.6% by 2031. Globally, we also forecast that female representation will advance at a similar rate, albeit from a lower base, from 18.7% to 22.4%. 

Worryingly though, progress appears to be stalling in the crucial Next Generation cohort, both globally and in the UK, where we forecast negative growth. Even if representation remains flat at 26.5%, the sector still has a long way to go to achieve gender equality globally, especially if it is to hit the 30% ‘tipping point’ discussed in our global research⁹.

Quantity vs Quality
 

Moreover, female leaders are still missing out in critical fund manager roles. The growth of female fund managers has been slow, lagging both senior leadership and C-suite cohorts. The percentage of female fund managers has increased from 10.3% in 2016 to just 12.1% in 2022, according to the Citywire Alpha Female report 2023¹⁰. The number of funds run by sole female managers has dropped in recent years, from 1,508 in 2021 to 1,490 in 2022, representing 5.2% of global funds, worth £440bn. Meanwhile the number run by sole male managers has increased from 12,659 to 13,110, a rise of 4% year-on-year, representing 45.9% of global funds, worth £4.2tn.

This view is also supported by Women Count 2022, a report from The Pipeline, a UK gender and diversity consultancy. They found that, of the 78 listed investment companies that reported on gender, none of those in the FTSE 100 index employed a female investment manager (equivalent to CEO in other FTSE companies), with only one female investment manager in the FTSE 350.   

Progress in fund management and other senior leadership roles can only be sustained with a consistent supply of female talent. The question is how investment management firms can consistently replenish their supply of female talent, particularly for front office roles like analysts. The factors preventing more women from progressing up the investment management career ladder are discussed in more detail in our next article.