Fund management’s blatantly obvious pay gap problem

The discrepancy between the average pay of male and female asset managers is gaining considerably more traction in 2018. But does the industry care enough about closing the gap? Or is this another box-ticking exercise?

On this International Women’s Day our culture is in the throes of a perceptible sea change. Since the back-end of last year momentum around women’s issues has been building like never before. We’ve seen industry titans like Hollywood bigwig Harvey Weinstein toppled; the men-only fundraising event for Britain’s rich and famous, the Presidents Club, exposed for being a breeding ground for sexual harassment, among countless other persons and firms brought to task.

Slowly but surely businesses and industries are waking up to the fact that there is a disparity between the way men and women are remunerated that needs to be addressed.

By comparison, the asset management industry seems decidedly less woke.

Salary benchmarking site, Emolument, has put the gender pay gap across the UK’s asset management industry at 27%, with men earning a median £93,000 compared with £68,000 for women. By contrast, the national gap is 18% and only 9% for full-time employees, according to the Office for National Statistics.

The recent influx of reports from asset managers outlining their gender pay gap is a rude reminder of just how far the industry has to go in tackling this issue.

And the fact that only 10 firms have released their figures is also discouraging.

Those firms that have reported in accordance with new regulation from the UK Government Equalities Office, have showed pay gaps ranging from 28% to 42%.

Even Hermes Investment Management, which prides itself on being an early adopter of environment social governance (ESG) investing, has copped to a 30.2% gap, which CEO Saker Nusseibeh said was likely to be on par with the rest of the industry.

Each firm has unsurprisingly expressed its dismay and disappointment over the current status quo. “We can and must do better,” lamented Jupiter Asset Management CEO Maarten Slenderbroek. “This is simply not good enough,” said Nusseibeh.

The problem, they stress, is not an equal pay issue. It’s a reflection of the fact that more men occupy top senior positions than women in the asset management industry. While this is certainly a problem among fund groups, it doesn’t address the fact that there is a pay gap across all levels of the organisation.

On Monday, Chelsea Financial Services held its annual speed interview event, which featured a panel of all female fund managers for the first time.

Speaking to the managers in attendance, none were shocked by the initial pay gap reports.

“The numbers don’t look brilliant but that’s not a surprise,” admitted Alexandra Jackson, who manages the Rathbones UK Opportunities fund. “No one thought they were going to look great.”

“You’re always a bit disappointed and surprised,” said Janus Henderson UK Property manager Ainslie McLennan, who added that we have only seen “the tip of the iceberg in the finance sector”.

What was striking was how uncomfortable many of these women were in discussing the issue of the gender pay gap or how some seemed willing to defend an industry that was statistically probably paying them less.

Although Sue Round, Edentree Investment Management’s director of group investments, said the gap was “sad but true,” she stressed that “it’s probably unfair to focus just on asset management”.

“When you start to look across other professional environments, like the legal profession, it’s probably quite a bit worse.”

Being the best house on a bad block isn’t exactly a winning endorsement of the UK fund industry.

When asked how she felt about the 42% pay gap at her firm, Standard Life’s Abby Glennie said that getting more women into senior roles “takes time”.

Glennie works on a team of six that happens to be 50/50 men and women, a set-up she conceded is “maybe quite unusual”.

“I think it would be great if we could encourage more females but also just a more diverse range of backgrounds and talents in the industry. I don’t think it has to ever be a male/female debate. I think it’s really encouraging when you get people of all different backgrounds, particularly when you’re working in a team job.”

Glennie is right, adopting more progressive gender policies takes time. But where is the general outrage from female fund managers right now after finding out that on average their pay doesn’t even come close to stacking up their male colleagues?

Blatantly obvious gap

City Hive CEO and founder Bev Shah thinks there are a couple of issues at work to explain the current pay disparity.

Firstly, some people conflate the gender pay gap for equal pay, she said. All you need to do is to “walk around an investment floor” where you will find more senior men and men full stop in investment teams before the ratio becomes “blatantly obvious”.

Shah also suspects that women are keeping silent publicly because they might be seen as trying to “rock the boat”.

“No one wants to be branded as a feminazi by commenting on something that’s really obvious, but I think most people now are very passionate about wanting to see more diversity on the investment side and wanting to see more diverse thinking in teams.”

Asset managers of all shapes and sizes struggle with the issue of gender diversity but in the smaller boutiques, it’s even more of an old-boys club, particularly on the investment side.

According to their websites, breakaway firms like Evenlode Investment Management and Terry Smith’s Fundsmith have no females in their admittedly small investment teams. Lindsell Train has one female fund managers’ assistant. Neil Woodford has one female analyst in a team of six, Lucinda Crabtree, who also happens to be the only woman employed by the company.

There are exceptions of course. EdenTree’s Round is one of two senior fund managers at her firm, but she is the only female manager within the investment team. Round says that having another woman on the team “would be great” because “it’s such a good industry for women”.

“With the right people and the right culture that’s supportive there’s no reason we can’t do more to attract talent.”

If diversity is the key to successful asset allocation or alpha generation as many of the larger players have now argued in support of progressive gender policies moving forward, are firms not adopting this policy missing a trick? Could they be improving their performance even more by having investment teams made up of people with diverse backgrounds and views? It is food for thought, especially for an industry that has received such harsh scrutiny for the fees it charges and active managers that are “closet trackers”.

Diverse thinking in teams is a difficult thing to quantify. There are loads of intersectional considerations that come into play – gender, class, race, sexual orientation, etc.

As Shah puts it: “There is no metric that will tell you how diverse in terms of thinking a team is, it’s quite an iterative thing. But having more women in a team is a proxy for diverse thinking.”

The financial services industry has been banging the drum about diversity for some time now, launching important initiatives like the Women in Finance Charter, Investment2020, the Diversity Project and her own firm, City Hive.

Even with the pay gap figures in black and white, Shah only believes change will start to happen when it inevitably impacts a firm’s bottom line and clients start to demand change. It’s similar to firm’s adoption of ESG investing, she says. Ten years ago sustainable and ethical concerns were ignored but then fund buyers and clients started asking questions.

“When your customers start asking you the questions, you then start to do something. When it becomes important to your customers that you are behaving in a certain way, you are looking to increasing diversity of thought, then we will slowly start to have the trickle-down effect within the firms.”

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