A Deeper Conversation on Women in Hedge Funds

Whitney Tilson is the managing partner of the hedge fund firm Kase Capital Management, which he founded more than 15 years ago. Mr. Tilson is also the co-founder of Value Investor Insight, an investment newsletter, and the Value Investing Congress, a biannual investment conference.

Dozens of people responded to my recent column on Evaluating the Dearth of Female Hedge Fund Managers with thoughtful comments on why the problem exists and some ideas to address it.

Some certainly approached the problem with humor. “It is a standing joke that Wall Street rewards unbalanced personalities, so maybe women are astutely steering clear of all the outrageous personality combinations you’ll find working here … only half-kidding!”

But seriously, it was encouraging to hear from women who were bucking the trend, though it is clear that the industry has been a tough one to crack.

A fundamental problem seems to be the way hiring is done. As several readers pointed out, the job posting and interview process is the first hurdle. One person wrote: “You must either be extremely well educated and well connected, or have gotten lucky to even land an analyst position. Most buy-side shops don’t even post jobs; you need to know someone.” On top of this, it’s even tougher for women according to some: “Believe it or not, when I was going through recruiting, I had headhunters telling me many funds would never ever consider hiring a woman because it just ‘looks weird,’” wrote one woman.

To overcome the hiring problem, one writer had an intriguing suggestion: “Something like a self-imposed Rooney Rule (which requires N.F.L. teams to interview minority candidates for all coaching jobs) would be an obvious first place to start.”

The few women who break into the industry face meaningful barriers. Several wrote about the lack of mentorship and apprenticeship programs. “I’ve always envied my peers, all men of course, who have the ability to call their mentors for advice regarding their careers,” said one woman. “Sadly, I’ve never had a mentor in my entire career (shocking!) that I could call to seek advice or for support.”

Another woman echoed these sentiments. “When I think about my own career and those of my male and female friends, what really strikes me is how often men get second chances versus how tough it is for women to get even first chances,” she said. “There are several men I know who blow up over and over or else just get blown out for only returning 0-5% or whatever … yet they keep on landing again.”

This was especially true after the financial crisis, when many men and women lost their jobs. “But having a more senior mentor and/or a network of buddies at other funds was a lifeline for people who got displaced. Most women didn’t have access to the lifeline,” she said. “The thing about friend networks is that men help out other men in ways that are different from how they connect to women. I constantly see men hire their friends when they have an open spot.”

The handful of women who have the experience and credentials to start their own funds face both headwinds and tailwinds. One woman reported that “there is significant amount of capital that is available to minorities such as women,” but another wrote:

When trying to launch a new, women-owned fund, we finally had to face the reality that despite a great three-year track record at our previous fund, 25 years’ experience in our markets, and even strong interest from institutional investors, we couldn’t get anyone to be first. We watched men with far less experience and sketchy credentials breeze by us in new funds. The lack of diversity affects markets as the ‘herd mentality’ becomes literal.

Many readers seem to agree that there is an inherent double standard in how women are perceived in the industry, and that old perceptions seem to die hard. One commenter wrote, “Overconfidence in women may be perceived as brash and invoke responses of, ‘Who does she think she is?’”

The solution to that problem may be to take a page from the recent efforts by Facebook’s Sheryl Sandberg to get women to “lean in,” said one observer: “Broadly speaking, men are praised and rewarded in our society for exuding these ‘alpha’ behaviors, while women are not.”

“As many observers including Sheryl Sandberg have noted, women often suffer ridicule for being ambitious when their actions are no different from their male counterparts’. As a result, women engage in self-limiting behavior even before the workplace, such as in business school, where men dominate the classroom conversation.”

The solution could be helping women in the hedge fund industry develop that swagger that allows them to “be able to look their male colleagues in the eye and say, ‘I’m the smartest in the room’ without being chided and feeling an artificial limitation that stems from upbringing or society.”

Several commenters suggested establishing better mentoring programs to nurture new young talent. One woman described how “life changing” it had been to have a female role model and boss at her first investing job:

I didn’t think it mattered. I always felt comfortable working in male-dominated environments. But it literally changed my life. Seeing a woman balance (elegantly!) her family and her investing career was inspiring. I gained a mentor, someone to look up. She inspired confidence and grace in everyone on our team.

I hope to be that for somebody in the next 15-20 years. And I really hope that the industry I chose (or accidentally fell in love with) … will be nimble enough to respond. I think it will be.

I’ve enjoyed this conversation and want to thank all of you for inspiring me to do a better job of teaching my three daughters about my business. Who knows? Maybe one of them will be my successor one day.