Women 'more likely to admit lack of financial know-how'

ST ILLUSTRATION: ADAM LEE

Survey finds female investors more cautious, likely to make decisions after talking to others

Women retail investors tend to be more risk-averse and honest with themselves about what they do not know than their male counterparts, a new survey has found.

Female retail investors are also more likely to make decisions collectively, and tend to be more long-term-oriented in their goals, State Street's Centre for Applied Research (CAR) has found.

The centre surveyed more than 2,880 retail investors across 16 countries and regions and 864 investment professionals across 19 countries and regions. It aimed to identify what differentiates men and women in investment decision-making.

In noting that women seemed more risk-averse than men, it said the men surveyed held 37 per cent of their investments in cash, while 45 per cent of the surveyed women's assets were in cash.

Men find volatility more bearable, with 58 per cent saying they would move to a more conservative strategy after a loss of greater than 20 per cent, compared with 70 per cent of women.

More women professional investors also see "skill" in their position as understanding information, the market, or risk. Men believe skill is shown by higher risk-adjusted returns.

Women retail investors also trade less frequently than men, with 65 per cent trading at least quarterly, versus 75 per cent of men.

Female retail investors are also more likely to admit they do not know much about an investment.

When asked whether active funds or index funds were more expensive, only 15 per cent of both surveyed men and women responded correctly.

However, only 28 per cent of the men admitted that they did not know which was more expensive. On the other hand, 43 per cent of the surveyed women first said they were unsure.

Women are also more likely to arrive at decisions after talking to others, State Street said.

Thirty-two per cent of women confer with a spouse, compared with just 18 per cent of men. Fewer of the surveyed women took full credit for their investment success compared with men - 57 per cent of women did, against 71 per cent of men.

Female investors also had longer-term goals for their investments than men, the survey said.

More time and evidence are required to gain the trust of women retail investors, it added. Only 46 per cent of women believed that the performance of asset managers was a result of skill as opposed to luck, compared with 57 per cent of men.

In terms of professional investors, CAR found women working in organisations that owned assets measured their success relative to their organisations' long-term goals. Such organisations include insurance firms or government pension funds. Twenty-six per cent of women respondents took this approach compared with 21 per cent of men.

More women professional investors also see "skill" in their position as understanding information, the market, or risk. Men believe skill is shown by higher risk-adjusted returns.

Within asset management firms, only 7 per cent of portfolio managers are women and only 19 per cent of investment analysts working in corporations that own assets are women.

The report also noted that past studies have found performance differences between female and male money managers.

One study found that hedge funds run by women significantly outperformed the broader market of hedge funds from 2007 to June 2013. During that time, the HFRX Global Hedge Fund Index fell 1.1 per cent, compared with an index of women-run hedge funds that returned 6 per cent during that time.

Another study found that recommendations from female sell-side analysts generate slightly higher information ratios than male analysts. The information ratio is the ratio of portfolio returns above the returns of a benchmark to the volatility of those returns.

A version of this article appeared in the print edition of The Sunday Times on November 22, 2015, with the headline 'Women 'more likely to admit lack of financial know-how''. Print Edition | Subscribe