If Women are Better at Investing than Men, Why Don't They Invest More?


NEW YORK (MainStreet) — It appears that women make better investment decisions than men, but for some reason invest less. For a period of more than six years ending in June of 2013, women-run hedge funds as measured by the Rothstein Kass Women in Alternative Investments Hedge Fund Index returned 6% -- outpacing the S&P 500 which gained 4.2% over the same period. Meanwhile the HFRX Global Hedge Fund Index lost 1.1%, according to a report by Rothstein Kass, released in January.

"There is meaningful alpha to be gained from investing in women-owned and -managed funds," Meredith Jones, a director at Rothstein Kass told the New York Times upon the report's release. "There appear to be both behavioral and biological factors that impact women's ability to manage money and make them consistent."

According to Insider Monkey, one of the largest woman-run funds, Litespeed Management run by Jaime Zimmerman, recorded an astonishing return of 118% for the period October 2000 through 2005, a time the S&P 500 floundered in the red, losing 13%. The fund is up 1.18% through the first quarter of this year.

And women also bring this financial finesse to the workplace. Wells Fargo reviewed the employer-sponsored retirement plans of more than 2,000 companies where gender was indicated and found the investments that women chose were more diversified than those of male participants. Fully 70% of women met what was considered "a minimum level of diversification" in their 401(k) investments – with at least two equities holdings, a fixed-income fund and less than 20% in employer stock, while 67% of men did the same. The firm says this has been a trend for at least the last two years.

This enhanced diversification might be attributed to the fact that nearly three quarters of women (74%) use managed investment options, compared to 71% of men.

But perhaps those "behavioral and biological factors" mentioned by Rothstein Kass's Meredith Jones are also preventing women from investing in the first place.

The same Wells Fargo survey reveals that while about half of all men (49%) are enrolled in their employer-sponsored retirement plan, just four out of ten women (43%) are.

-Writen by Hal M. Bundrick for MainStreet

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