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Women beat men in hedge funds

By Sheyna Steiner ·
Thursday, January 16, 2014
Posted: 5 pm ET

Studies have shown that women generally make better investors than men and that extends to the hedge fund world. Women-owned or managed hedge funds outperform industry benchmarks and their male colleagues, and they have for six and a half years, according to an annual report from Rothstein Kass Institute, a financial services firm. The report was released this week.

Rothstein Kass measures the return of women-owned or managed hedge funds using the Rothstein Kass WAI Hedge Fund Index which is made up of 82 women-owned funds.

This chart compares the WAI Hedge Fund Index with the HFRX Global Fund Index and the S&P 500. While the latter needs no introduction, the HFRX Global Fund Index is designed to represent the hedge fund universe.

WAI Hedge Fund Index versus benchmarks, January 2007-June 2013

Statistical Analysis WAI Hedge Fund Index HFRX Global Fund Index S&P 500
Compound ROR 6.0% -1.1% 4.2%
Standard deviation 9.5% 6.9% 17.3%
Cumulative return 46.5% -7.14% 30.4%
Cumulative VAMI $1,465 $929 $1,304
Sharpe (5%) 0.2 -0.8 0.0
Largest monthly gain 7.3% 3.1% 10.9%
Largest monthly loss -7.6% -9.3% -16.8%
% Positive months 62.8% 55.1% 61.5%
% Negative months 37.2% 44.9% 38.5%

Source: Rothstein Kass

In the report, "Women in Alternative Investments: A Marathon, Not a Sprint," Meredith Jones, a director at Rothstein Kass, postulates that women-owned and managed funds do better than the wider universe of hedge funds because of the size of their funds and the way that women perceive risk.

Certainly, fund size can play a role, as it is a well-known fact that smaller funds tend to outperform larger funds. However, the success of large women-owned or -managed funds means that explanation is partial at best. Another simplistic explanation is 'risk aversion.' In fact, the truth is that women often perceive risk differently than men and, as such, tend to manage their portfolios differently. Studies have shown that women trade less, are less apt to market time and have less ego involved in their investments than their male counterparts. The result is less performance slippage from frequent trades, a diminished tendency to sell at the bottom and a more consistent application of their strategies. Over time, this can add up to a meaningful and persistent performance differential.

The report also surveyed women in the alternative investing sphere. One question asked what it is like to be a woman in the alternative investing industry. Sadly, 61.3 percent of respondents agreed with the statement that being a woman makes it more difficult to succeed in the industry. More encouragingly though, a majority of respondents, nearly six in 10,  believe there will be more women in the alternative investment industry in the future. Only about 40 percent of respondents believe that there will be an increase in women-owned or managed funds in the near future.

Maybe you're not the hedge fund type, but would you actively seek out an investment managed by a woman?

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Follow me on Twitter: @SheynaSteiner.

Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.

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