Willis Towers Watson will require fund managers to provide data about the gender composition across their workforce, a move that responds to evidence that more women in the workforce improves financial performance.

The plan was mentioned by Luba Nikulina, global head of manager research at Willis Towers Watson, at an MSCI event on the subject of women in finance in London last week. She spoke of “hardwiring this into the process of allocating money”.

“If asset owners add their voice it will help to move things forward,” she added.

She was responding to a comment from a representative of a local authority pension fund about asset owners wanting better data on gender representation in roles below board level.

Nikulina later told IPE that the consultancy was also considering including flexible working arrangements in its assessment of investment managers, as these can influence the stability of fund management teams, which the consultancy values.

A member of the audience from an asset manager said that investment teams want to be able to show team stability when they go to investment consultants.

Nikulina said that good data was key to being able to research the link between gender diversity and investment performance.

The premise of the event was the “business case” for gender diversity and the underperformance of financial services – and fund management in particular – in this respect.

Panellists at the event articulated the problem in different ways.

Roger Urwin, speaking in his capacity as strategic director of the CFA Future of Finance Initiative, said that finance needed a “clean licence to operate” and “it won’t be clean if we don’t have diversity”.

Tamara Box, founder member of the 30% Club and managing partner, Europe and Middle East at law firm Reed Smith, spoke about gender diversity as a “bottom line” issue and said the finance sector “seems different” when it comes to gender issues.

She ventured the theory that a belief in finance having a strong culture of meritocracy was partly to blame for the sector lagging on female representation in senior roles.

Box said this culture was strongly linked to metrics such as pay that are easily influenced by working long hours. However, the belief that the culture was meritocratic skewed people’s reading of reality, causing them to “miss unconscious bias feeding those metrics”.

Meritocracy is confused with the majority, she said, which dictates what constitutes success and what is considered to be normal.

Millennials to the rescue

Urwin – who is also global head of investment content at Willis Towers Watson – agreed that the culture of long hours in finance, as reflected in “convexity of pay”, was one of the main reasons for poor gender diversity in this sector.

Companies “need to chill out” about long hours, as “clients can cut you some slack”, he added.

The role of cultural norms and expectations in gender diversity was also discussed.

Willis Towers Watson’s Nikulina said that there were more women in fund management in emerging markets than in developed markets. Comparing the two, even though the fund management industries in each are at different stages of development, can provide “interesting insight” into the influence that social norms and behaviours can have, she said.

She gave the example of the Soviet Union, where she was brought up, noting that women were expected to return to work after having children and worked “across all ranks”.

Linda-Eling Lee, global head of ESG research at MSCI, highlighted three possible connections between female representation in the workforce and financial performance benefits.  

These benefits could stem from women being “better suited to today’s economy”, Lee suggested, from a greater diversity of thinking, or “human capital arbitrage”.

The latter is the idea that, given the barriers they face, “the women who end up at the top are extraordinary so the performance edge may erode as the pipeline to the top opens up”.

Great hope was placed on millennials as the driver of change on gender diversity because, as relayed by Lucy McNulty, author of an annual survey on women in finance, “millennials are hungry for equal treatment” and “the best talent will walk away if companies don’t change”.