What if I told you that all it takes for us to witness a positive change in the world of finance is to have more women investing more of their wealth? Women around the planet are generating more wealth than they ever did before, and currently control about 32% of the world’s wealth cumulatively, according to a study by the Boston Consulting Group titled ‘Managing the Next Decade of Women’s Wealth’. Women are adding $5 trillion to the wealth pool globally every year—faster than in years past.
In several economies, particularly across Asia, women control the purse strings in their households. They make crucial and consequential decisions for their families impacting lifestyle, well-being and health. Despite the accelerated growth in wealth generation by women, they still fall behind men in managing their investments. The reasons for this are multifold.
Income, not gender is a stronger predictor of investor behaviours
The gender investing gap, which measures the ratio of how men and women invest their disposable income, depicts women are holding on to more capital and refraining from investing to multiply their wealth, compared to their male counterparts. Studies point to women holding about 71% of their wealth in cash versus 60% among men.
Surveys have shown that most of the behavioural differences between men and women narrowed when controlling for income. This means that men and women in the same income bracket invest in similar ways. Therefore, income is a stronger predictor of investor behaviour than gender. Unfortunately, there are two problems here – first the gender pay gap continues to exist, and women are still under-represented in high-income tiers.
In a 2018 study by the Ministry of Manpower (MOM) and National University of Singapore, the adjusted gender pay gap was 6%, narrowing slightly from 8.8% in 2002. A woman in Singapore is doing the same job as her male colleague, in the same industry, at the same age and education level, but for lower pay.
A “broken rung” continues to exist for women on their step up to being managers, asserts McKinsey & Company in its global report on ‘Women in the Workplace 2021’. For every 100 men promoted to managers, only 86 women are promoted — widening the pay gap over time. On top of this, women with children are hit with the “Motherhood Penalty”, where the pay disparity between mothers and non-mothers could be even larger than the pay gap between men and women
Women do what good investors do
Even with the challenges they face and the tide against them, data shows that, when given the right platform and opportunity, women make good investment decisions. Studies suggest that women’s longer research-based decision-making process and strong perceptive skills augur well for successful investing. Women are known to spend more time researching their investment choices, take on appropriate levels of risk with their investments, and be consistent.
A recent analysis by Goldman Sachs showed that after adjusting for risk, female managed funds outperformed their counterparts amid the coronavirus-related market swings. Despite a growing body of evidence that more diverse teams produce better results, women accounted for just 14% of 25,000 fund managers working across 56 countries at the end of 2019. A Morningstar analysis even found that in the UK there are more funds run by men called Dave than those with female fund managers.
ESG investing – the area where the gender ratio is shifting
Through impact investing and more emphasis on Environmental, Social and Corporate Governance (ESG) factors, women are recalibrating the world of investments by choosing to back investments that can help improve our world. At Syfe, we witness this first-hand with ESG being the most popular thematic portfolio among women. Almost half of assets from women going into the thematic portfolios are being channeled into Syfe’s ESG and Clean Energy portfolio. This shows the overwhelming support and preference for women to invest with impact.
At the same time, more women are leading ESG integration and investment in organisations. Perhaps they see it as an opportunity to make investing more purposeful and inclusive by stepping away from the “old world” of finance that is traditionally male dominated. This cause is also data-backed with research showing that firms with high gender diversity on their board of directors have been more profitable and larger than firms with less gender diversity.
Here’s a fun fact; one of the original impact investors is Sister Patricia Daly, a nun with a fund! She led the way by walking the talk – tabling resolutions for better workers’ rights, environmental practices and more at annual shareholder meetings. As ESG investing becomes mainstream, it is hopeful that women can lead the way in paving a more sustainable future for all.
Driving positive change in the world of finance through women
Women, with their holistic and values-based approach towards money and investing, hold the potential to shape the world we live in. Imagine the impact on organisations and economies if women invested the additional $5 trillion they are adding to the wealth pool every year!
We need to encourage, embolden and support women to invest as they are. While there are many ways to change the world, I believe this is one important way of doing so — investing like a woman!
Contributed by Samantha Horton, VP Business Development, Syfe
Syfe is a digital investment platform that is building the next generation of financial services for individuals in Singapore. It offers a holistic suite of products from fully-managed portfolios for long-term wealth management to a neobrokerage for easy investing into stocks and ETFs.
This article was first published in The Business Times.