Bringing gender equality within reach in UK investment managers

To design and deliver an informed strategy to drive change, firms first need to understand the root cause of the barriers to female progression. In this next article, the second in a series of four blogs looking at the leadership opportunities for women in UK investment management, we unpack the seven leading factors holding back progress.

1. Limited opportunities to gain experience and establish an investment track record

A key barrier to progress in fund manager roles is the opportunity for women to establish strong investment track records, which often involves running new strategies. While asset managers were launching fewer new funds in 2022 due to spending cutbacks, only 6.2% of new strategies were assigned to sole female managers or all-female teams according to the Alpha Female report¹. Women tend to be given more niche, specialised strategies and run funds that are one-third smaller, on average, than those run by men (£320m vs £480m). This may have a knock-on effect as asset managers tend to merge and cut funds during economic slowdowns, focusing on core strategies. This could, therefore, put more pressure on funds run by female managers.

2. Narrow candidate pool of fund managers with low retention

Another key barrier to achieving gender diversity is the narrow candidate pool, with a shortage of experienced female fund managers. According to CFA UK, women often enter the industry at relatively higher numbers as analysts and researchers. However, as women progress in their careers, retaining them in the industry becomes a material challenge². Promotion opportunities for women may be more constrained due to unconscious biases and a lack of support in the workplace. The average turnover rate for female fund managers over the past 10 years stood at 42%, compared to 28% for men, indicating a much higher attrition rate.

3. Lack of a transparent progression pathway

Deloitte research indicates that the lack of clearly defined paths to top leadership is the biggest obstacle to women's advancement³. Transparency in pay and promotion opportunities are the top two considerations for women’s career choices, cited by Amanda Pullinger, former CEO of 100 Women in Finance, in a recent interview with Deloitte⁴. Moreover, a recent survey by the Investment Association and the Thinking Ahead Institute found that only 40% of all employees feel there is fair access to progression within their organisations, highlighting the need for increased efforts⁵.

4. Lack of unbiased and effective workplace policies

In a recent episode of the “ESG Edit with Jessica Hodges” podcast, Sophie Winwood, co-founder and CEO of WVC:E, highlighted that the transformational change required to address the gender imbalance in industry should start from the top, with senior managers and C-suite executives playing a crucial role in implementing unbiased hiring policies, parental leave policies, and investing in female-founded businesses. However, we believe it is somewhat more challenging for firms to implement workplace policies that support female senior leaders, compared to those at entry level, due to their increased responsibilities and expectations tied to their roles. While flexible, hybrid working policies are not inherently biased, their implementation in practice can create bias. This is because these policies are more often taken up by women than men, and therefore any challenges that may arise in ensuring they operate effectively fall to women to manage. 

Put simply, the challenge lies in recognising the need to redesign the workplace to enable women to succeed in an environment that was originally created for and by men. To achieve this, it is crucial to reassess the firm's purpose and determine how it can best be met (as far as possible) in ways that allow all employees to contribute. By designing a workplace that is inclusive and aligned with the needs of all employees, firms can move away from trying to fit women into a male-dominated culture and working style.

5. Lack of inclusive workplace culture

As emphasised by the FCA and PRAs’ consultation papers, culture is key to achieving gender equality. Addressing issues like bullying, harassment, and discrimination is crucial to foster a supportive environment. Workplace distractions can have a profound impact on culture, psychological safety, and the overall working environment. Firms need to lead by example, setting the tone from the top and promoting behaviours that contribute to a positive and respectful work environment.

6. Lack of pay transparency and gender pay gap

An FT analysis of 2022-23 data reveals that 79.5% of UK employers pay men more than women, with an average gender pay gap of 12.2%⁶. The financial services sector has a particularly poor record, with an average gender pay gap of 22.7%⁷. There is an increased drive towards pay transparency, with the EU Pay Transparency Directive (EUPTD) introducing more stringent reporting and data gathering requirements than the UK gender pay gap regime. Whilst this Directive does not apply directly in the UK (following Brexit), UK firms with operations in Europe may well find that they need to adapt their job architecture and pay transparency arrangements as part of a drive for consistency across their group structure. Much of what the EUPTD requires in terms of transparency is also echoed in the calls for change in the recent Treasury Select Committee report on Sexism in the City and in Labour party work proposals. Younger generations of workers may be less tolerant of pay disparities and more vocal about their needs which may mean this becomes a much more visible issue. Indeed, the general drive towards greater pay transparency will surely mean that it will be harder, and costlier, for businesses to ignore this issue in the future⁸.

7. Balancing diversity with caution

While positive action is permitted under the Equality Act, crossing into positive discrimination territory, where individuals are actively promoted without the level of underrepresentation required to make such action more likely to be lawful, can lead to potential discrimination claims. Thus, firms tend to be cautious and wait for natural attrition rather than taking proactive steps to address female underrepresentation. Additionally, industries with higher salaries and thus, lower turnover face challenges in making immediate changes to teams, and particularly boards with limited numbers of roles. Introducing role rotation can be an effective way however of tackling this challenge. 

In our next article, we will look at what needs to be done to begin to effect the change needed to redress the imbalance in gender representation in the UK’s investment management sector.