Do investment trusts have a problem with women?

AIC chief cannot ‘guarantee’ fund companies will meet their gender diversity target by 2020

By 2020, FTSE 350 companies have been told they must have at least a third of their board positions occupied by women, under rules laid down by the UK government’s Hampton Alexander Review.

You might expect, then, that companies are falling over themselves to ensure they will comfortably meet the deadline. So far, though, the results don’t look good.

When the UK’s Investment Association and the Hampton Alexander Review published a list of shame in March 2019, eyebrows were raised. The announcement named 69 companies with boardrooms consisting of mainly men – with fewer than one third of seats occupied by women. Incredibly, given it’s 2019, some have no women at all.

The statistics for one sector made for particularly uncomfortable reading: the world of investment trusts.

Investment trusts’ gender problem

More than 20 of the companies on the list are investment trusts – listed funds sold by asset managers. The results show that despite endless marketing efforts by fund groups to back initiatives on gender equality, many investment trusts still won’t have females in the boardroom.

So why do investment trusts have such a problem with women? Ian Sayers, chief executive of the Association of Investment Companies, told PA sister title ESG Clarity that they don’t.

“Boards are very well aware of this, and a number have made statements about what they are doing to meet the target. They will respond to the Investment Association/Hampton Alexander letter in due course.”

Sayers says that the investment industry has “an issue with how many people at executive level are women”. That is certainly true. However, it also suggests that there is a tiny pool of women in executive positions.

“I am not suggesting that there is a lack of women who are capable of taking on investment trust positions,” Sayers quickly clarifies. “But, if you were looking for senior portfolio management experience and you were drawing up a list of candidates, there will be more men than women.”

Plenty of options

While there may be a limited number who actively participate in investment trust management, at present, there are literally hundreds of female portfolio managers, who would have transferable skills.

PA’s sister title Expert Investor recently conducted a study of 329 European equity funds. Of these 329 funds, 39 had female portfolio managers. The study included funds from the two European Investment Association sectors. There are 36 IA sectors, which suggests there are literally hundreds of skilled female portfolio managers.

Sayers says that the presence of so many investment trusts in the Investment Association / Hampton Alexander list of shame could partially be because some boards are so small.

“We operate on different board sizes to the FTSE 100,” he says. “A female director could step down, and, because the board size is so much smaller, you could move from 50% [female] to 25%.”

The trade group boss says members of the AIC must sign up to a code which requires trusts to comply or explain if they fail to consider gender diversity in their recruitment policies, but this is a new measure. Many trusts have not yet reported on their diversity policies in their annual accounts.

“The situation with gender diversity has been improving steadily over the past few years,” he says. “People will often say progress could have been made quicker, but a target of 2020 was chosen.

“There have been various initiatives we have done to broaden the pipeline of people interested in becoming involved in management within the investment trust sector.”

Encouraging women

Among the initiatives being backed by the AIC are projects to encourage investment trusts to consider female board members from backgrounds outside of portfolio management.

Sayers says that high flying executives with skills in marketing and communications could be a rich source of talent for investment trusts looking to get their house in order.

“You do need some directors that have portfolio management experience, but how many is debatable. What our sector is looking at, is whether you can broaden out the type of skills you can bring onto a board.”

Sayers says that investment trusts could benefit from “broadening the pipeline” from where they recruit, considering board members from other sectors outside of the investment industry.

At a recent AIC conference, delegates were asked to vote on the sectors that they considered to have the highest number of senior executives with transferable skills. Marketing, communications and digital marketing polled well.

“That is an area that has a lot more women employed in that industry,” says Sayers. “You will see more candidates coming through that sector.”

Given this broader appreciation of transferable skills among AIC members, you might think that the days of investment trusts without women in the boardroom were numbered.

ESG Clarity asked Sayers whether he could guarantee that all investment trusts would meet the 2020 Hampton Alexander Review target that 33% of board positions would be occupied by women.

His reply? “I don’t think I could guarantee that that would be the case.”

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