Fewer than 125 of the thousands of hedge funds in the world are owned or managed by women, estimates Meredith Jones, author of the recently published Women of the Street: Why Female Money Managers Generate Higher Returns (and How You Can Too). Yet Jones, who founded MJ Alternative Investment Research and formerly directed the Rothstein Kass Institute, an alternative-investment think tank, finds that women are superior investors, thanks largely to seven characteristics and behavioral tendencies — from lower testosterone levels, which dampen overconfidence, to out-of-the-box thinking — that distinguish female from male investors and translate into long-term profits. Data in the book’s introduction backs her up: The average female-led hedge fund, as represented in the Rothstein Kass Women in Alternative Investments Hedge Fund Index, returned an annualized 6 percent between January 2007 and June 2012 while the HFRX Global Hedge Fund Index, a commonly used benchmark representing the industry, fell 1.1 percent. Women of the Street, which profiles 12 U.S.-based female money managers representing a cross section of the investing universe, says this is a missed opportunity for investors. Increasing the number of women in the industry and thus creating a more diverse investing world will lead to strong outperformance, Jones argues. “When you consider the additional diversification benefits of investing with diverse managers, the inclusion of women becomes critical,” she writes. In such a profit-driven environment, there is a compelling monetary reason for women to enter trading, money management and other top financial roles. The sustainable return and diversification benefits should also encourage investors to promote additional female hires and female fund launches.
Women of the Street — a quick but thoughtful read written as a series of interviews — closes with ten guidelines for successful investing that closely mirror the seven primary reasons women make better investors. The goal of the book, says Jones, is to show that women can successfully manage money and to highlight the advantages of gender, behavioral and cognitive diversity in investing. For long-term success, she concludes, “invest like a girl.”
