The Uphill Battle Women Still Face in High Finance

A guest post by Benn Eifert

Benn Eifert, manager of the San Francisco-based hedge fund QVR Advisors and star of finance Twitter, wrote a great guest post last month about how to recognize bullshit when investing their money. Now he’s back, with a guest post about how women still aren’t treated fairly in the finance world. I think people in other industries would do well to read this post and think about whether a similar dynamic is playing out in their own corner of the world.

The opinions expressed here do not necessarily reflect the opinions of QVR Advisors.

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Women are severely under-represented in highly paid risk-taking and managerial roles in hedge funds, asset managers and investment banks. This is not driven by a lack of inclination towards hard-charging, technical or lucrative fields. Stanford’s recent MBA class is nearly half women and has been in that range for many years; finance PhD students were closer to one-third.[1] New graduate classes entering investment banks are typically well gender balanced.[2] However, women tend to have negative experiences and insufficient opportunities in those first critical several years of their professional careers and are much more likely to drop out or be pushed into supporting roles.

I care about this because I see the injustice of brilliant, talented women friends struggling in ways I never had to. I see it drain them. The field I have played this game on is wildly skewed. Much of the best talent in the industry is pointlessly deterred by misogyny. As Simone de Beauvoir told us, “Her wings are cut and then she is blamed for not knowing how to fly.” “Firms who can’t support diverse talent are stuck with the bottom performing percentiles of men, when they could have had better.”

I am in a position where I can discuss these things openly without fear. I mix my words and the words of many others who are “often unable able to speak up for risk of retaliation or being labeled as a risk…”

I regularly see and hear about four major themes undermining women in the field.

·       Sexual harassment

·       Subjective double standards for professional behavior

·       Exclusion from networks that create professional opportunity

·       Segregation and discriminatory tracking of roles within firms by gender

While of course there are individual biases at work here, it is important to understand that these are deep-rooted structural issues that perpetuate power dynamics and shape group behavior. Efforts at empowering women must recognize that and not just focus on criticizing the worst actors.

Sexual harassment

Outright sexual harassment is still shockingly common, albeit less public than two decades ago. Most of my female friends in the industry have experienced unwanted sexual advances from male bosses, colleagues, or investors. A casual suggestion that she drop by the managing director’s hotel room after a client event; an investor drunkenly groping her at dinner and asking her colleague if she has a boyfriend; the senior executive who joked at a leadership retreat in front of the entire bank executive team that he wanted to take her upstairs and fuck her.

Many women’s common reaction to sexual harassment is to let it slide and say nothing. They view this as a straightforward analysis of risk and reward. In the case of male colleagues and bosses, they usually believe that escalation internally will be fruitless and result in retaliation. The worst perpetrators are often senior managers or major profit centers with an aura of untouchability. Human resources departments exist to protect organizations, not employees, and they inherit the short term bias of the bankers and traders they work for. Repeat offenders can be reported internally by women victims, and their behavior widely known within the firm, but never be meaningfully sanctioned. “A dude with a thick file against him would continue to get promoted because the bank doesn't give a shit about sexual harassment, which was both insane and felt defeating. I recall one top manager who would regularly stick his hand up my and my female colleagues' skirts at outings who was promoted despite having to write letters of apology to every woman I knew at that institution, which was the sorry excuse for punishment.” Seeing a sexual predator remain untouched in a position of power, despite his behavior being common knowledge, has a crushing effect on women’s morale in an organization.

There is also a powerful shame factor. My friend who was sexually humiliated by a top executive at an event in front of the whole bank leadership: “how was I supposed to face the other executives in in the office afterwards?” What possible path is there to career growth in that kind of environment? Sexual harassment is a huge predictor of quit rates. Importantly, this shame is a result of male-driven culture putting that shame on the victim, when it should be squarely on the perpetrator. Meanwhile formal nondisclosure clauses in contracts bury the evidence.

In the case of clients or investors, the importance of closing a deal or maintaining a business relationship often keeps women quiet. This is especially true if a woman must answer to unsupportive men in her own organization. One of my friends recently had a large potential investor start making inappropriate sexual advances towards her as the deal progressed. “Now I have to weigh this in terms of business implications. I think these things are not done with malice in many cases; they are just deeply embedded in the culture.” If she were to confront him about this, does she get blamed for losing a big investment?  Having to constantly evaluate the trade-off between mental health and business value is exhausting.

“In a business setting, sexual harassment is not even necessarily about the consumption of sex per se, it is about using sex as another tool to preserve traditional roles and power. So, the culture of sexual innuendos does the job, even when sex is never really exchanged. It tells every woman, no matter what your professional accomplishments are, you remain a woman-commodity. Your value is a derivative of how much pleasure you can give to men.”

Research finds that experiencing sexual harassment can have major negative consequences for women’s careers, including lasting physical and mental health issues, stalling or declining earnings, and dramatically increasing the probability of leaving their jobs.[3]  “People who do not carry decades of this on their skin don’t understand the deep personal toll it takes on you in the long term. This culture curtails real opportunities for women.” As one female Master of the Universe put it: “It was pure luck that I never had to deal with that, nor did any of the women I know who succeeded like I did. It is a career ending experience.”

Subjective double standards

Even when the most overt forms of misogyny are absent, more insidious patterns rear their ugly heads. Subjective double standards in professional behavior are perhaps the most common. The worst frictions seem to occur where traditional stereotypes of female personality conflict with the characteristics of successful professionals in a fast-paced, high-pressure workplace. “The same skills that are an asset for men, are a liability for women if they don’t possess them, or another type of liability if they do.”

Behaviors interpreted as confident and assertive in men are often seen as overbearing or inflexible in women. “Strong, aggressive women on the trading floor get pulled aside and told to be nicer or to calm down.” The trading floor is the most aggressive professional environment on Earth! Men exemplifying the “Big Swinging Dick” personality of Michael Lewis’s Liar’s Poker are worshipped like gods of war and fortune. But women are told to tone it down and temper their ambition with warmth.[4]

Men tend to describe women as divisive when the latter push through decisions in a way that would be praised as leadership in men. Men often describe other men fighting for their ideas or resources in the workplace as persistent and effective; they see women doing the same as overly emotional. When women exhibit an assertive leadership style stereotypically associated with men, they face disapproval and social penalties that keep them from getting promoted.[5] One study of women in tech published in Fortune found women are more often called abrasive and bossy in performance reviews while men are praised for being aggressive.[6] “The line trader who mutters “she’s such a bitch” about a saleswoman and then shows a six-point-wide market to her client. The broker you worry won’t give you color anymore if you don’t fit their type of client.”

Another aspect of professional double standards are the lengths women need to go to be taken as seriously as their male colleagues. Women frequently deal with men interrupting and speaking over them in meetings. They often find men from other organizations looking to their own more junior male colleagues as the source of authority, assuming that women present must be in supporting roles. They fight drawn-out struggles internally to build up support for their viewpoints, and to get their contributions properly recognized at bonus season. When I was starting my career, I had the opposite experience as a tall, athletic white man. I was consistently given far more responsibility and credibility than I probably should have had, and it accelerated my progress sharply.

Even at super-senior levels the effect is the same. “When I started my own hedge fund, I asked my male colleagues to repeat to prospects what I said. They agreed to be part of this “social experiment” and noticed how my saying something had little weight, but their repeating what I said made the difference. I am the expert on paper, but never treated as such.”

Professional exclusion

The phenomenon of exclusion intensifies the struggle to build up internal trust and support. Professional life is inherently social and tied up in support networks and mentorship. There are of course the big items -- weekend golf events with a managing partner of the firm (women repeatedly bring up golf as particularly insidious); invites to Goldman’s luxury suite to watch the Knicks play with a group of colleagues. The small ones are just as important: stepping off the desk with the MD to go stand in line at a food truck; casual banter with the partners in a conference room when markets are slow.

These may seem innocuous, but mentorship and internal sponsorship is critical to long-term career development. It is common to see men invited, even very junior ones, especially if they come from the right background (the Yale lacrosse team; a nephew of one of the senior partners). My women friends consistently describe being excluded from the old boys’ club and watching the differential impact on their careers play out. “Many business environments are still culturally a male social club, where back channels are equally important or more so than formal ones, but a woman’s access is limited.” As Lin-Manuel would say, these are ”the rooms where it happens.” The special knock to get in remains an artifact of wood-paneled cigar rooms where the code is passed down.

Perhaps counterintuitively, weak attempts to address gender issues in the workplace without addressing the underlying culture can lead to greater exclusion. Men may watch themselves around their female colleagues, segregating their informal and social activities to avoid women taking issue with their denigrating comments.

I remember being a junior quant when the firm had an intern whose father happened to be a top private equity founder. That inevitably gave him strong social rapport with management. He reported to the (female) head of Investor Relations. He made fun of her and called her “whatserface” behind her back, which the partners found hilarious. Her bosses aligning with the junior male offender against her was crushing. I felt terrible, but in recollection I don’t believe I ever said anything or acknowledged this to her, which was a terrible lack of support.

Segregation and role tracking; discrimination

These dynamics all feed into the critical element of segregation and tracking of roles within the industry. Many larger firms, both on the buy side and the sell side, value diversity statistics and have increased the overall share of women represented among their employees. In practice, women are heavily over-represented among supporting roles in sales, investor relations, compliance and operations. Much more rarely do they advance into high-power decision making seats in trading, research, portfolio management or corporate management. Those promotions are not the result of mechanical progression through levels; they depend critically on perceived credibility and support within the top ranks of an organization.

One thing I have observed personally is how necessary but low-profile tasks without a natural owner get disproportionally passed off to female colleagues. “Women find themselves taking on “chores” of the team, being good citizens to facilitate the team’s win, in a way that is unrecognized.”

I recall being in a meeting where a platform salesperson asked a senior fund manager what his wife did. She was a full time home maker. The salesperson remarked “good, that’s the right answer.” That is the epitome of a cultural bias that women belong in supporting roles. My wife being a trauma surgeon and technology company founder, this made me white with rage.

Importantly, despite chauvinist stereotypes, all available research suggests women are as suited or more so for investing roles than men. Studies by Goldman Sachs and HFR noted that hedge funds managed by women have outperformed those managed by men during turbulent markets, though sample sizes are small.[7] Fidelity’s Women and Investing Study of a decade of data from 5.2 million accounts shows that women investors on their platform outperform men by 40 basis points per year.[8] Women over-trade less than men and are less likely to panic-sell during market downturns.[9] The threat of competition from talented women who defy their chauvinist stereotypes

“Another insidious effect is women can start to question their worth. When it's clear that what is valued is how they look, and whether they help the men around them have a good time, talented women can start to question, is that why I'm here? Am I actually good at my job function? Of course they are. But the culture is showing what it values.”

Some women make it to the top of high finance despite the sharply uphill battle. It tells you how incredibly strong they are. “But do not underestimate what this all does to you, whether you win or lose. It is a cost nevertheless.”

What can men do to help change this culture?

Men often acknowledge these issues and try not to contribute to them but feel powerless to help. Systemic and cultural change is difficult. What can men do? How should they react?[10]

“We need to shift the focus from individual biases, held by men and women alike, to institutional structures of power where such power is held mostly by men. From awareness to changing incentives. Culture is about setting rules, setting boundaries, spoken or unspoken, for people to follow formally or informally.”

Broadly speaking there are two categories of reactions. First is individually within an organization, and second is for those with power to set policy in their organizations.  

On an individual level, the consistent feedback I get is that the single most important thing men can do when they see inappropriate conduct affecting a woman is to raise it or acknowledge it, either in the moment (“Hey, could you let her finish that thought please?”) or afterward (“Hey, I heard that, it was wrong. Are you ok?”) depending on the context. It seems small or trivial, but just establishing the right behavioral expectations and making sure a woman knows she has public support and recognition is meaningful.

In a small team, even the presence of a single voice that clearly disapproves of bad behavior can be enough to tamp down on “boys will be boys” culture. If it is something serious that might lead to internal conflict, and you are willing, let her know that you’d be willing to back her up on the issue. The opposite – where a woman is treated badly and sees her colleagues actively ignoring or supporting that treatment – is the worst possible outcome for her.

I love this anecdote from Damsel In Distressed:

“I was once given a pre-printed name tag at a conference that read “Dominique Mielle, Canyon Capital, Analyst.” I made a mild effort to find the twit who had confused me with a lowly junior person, then gamely put it on, head high. When I stopped by to chat with one of the partners during the day, he immediately spotted the label on my jacket. Before I could say ineptitude, he yanked it off, reached for a pen, crossed out the erroneous title and wrote in large capital letters PARTNER.”

Another piece of feedback I heard is on the importance of men supporting women as equal partners in both business and family environments, as cultural norms in the workplace often reflect an extension of day-to-day lives outside the workplace.  

For top-level male decision-makers, a few other themes came up consistently:

·       Communicate intolerance of misogyny clearly from the top

·       Recognize the long-term business cost caused by a toxic culture and toxic male employees; do not let short-term direct costs of cracking down on it outweigh that.

·       Reluctance to hire women for fear of lawsuits is extraordinarily short-term thinking. Address the problem, not the symptoms.

·       Recruit in ways explicitly designed to source a more diverse candidate pool, including direct outreach, not just through established networks

·       Create formal mentorship processes; avoid traditionally male-dominated social and networking activities; make more events family-friendly

·       Consider the role that flexibility and hybrid work can play in ensuring people tasked with a disproportionate share of home responsibilities can succeed

·       Empower women to take matters into their own hands, by backing women into top-level leadership (both within your firm – and starting their own!) and giving them full support

These issues hit home hard at my firm. To my personal shame, we have just one woman team member out of a dozen as of this fall. QVR is a small firm and historically has hired only very experienced people for very specialized roles, not having the bandwidth for training from a junior level. Many women have bad experiences and inferior opportunities and do not make it into the pool senior risk-takers and decision-makers that we have hired in the past. Our job applicant pools have been more than 97% male. As we grow, this is the first year we have hired junior staff, putting in the resources to mentor diverse talent and earn the long term rewards of doing so. And we would be thrilled to hire at the most senior level given the opportunity. We will ramp up investment in diverse junior staff and roll out a new mentorship program where we can help a larger number of under-represented people early in their quantitative finance careers. We are proud financial supporters of Girls Who Invest, a nonprofit dedicated to bringing more women into portfolio management and leadership positions in finance. I am very dissatisfied with the job we have done directly contributing to this fight for equal opportunity. But I will acknowledge that and yet still speak up.

“The point is not to be able to win every battle. Those people who struggled and felt defeated during their times set the example for those who followed. What we do at times is not acknowledged loudly but can have an effect nevertheless, because culture changes slowly and imperceptibly until it changes for good.”

Benn can be reached at benn@qvradvisors.com

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[1] https://poetsandquants.com/2019/09/18/stanford-graduate-school-of-business-stanford-mba-program-class-profile/#:~:text=16)%20announced%20that%20it%20has,41%25%20only%20a%20year%20earlier.

[2] https://www.cnbc.com/2019/03/18/goldman-sachs-says-half-of-all-the-junior-bankers-it-hires-must-be-women.html

[3] Paying Today and Tomorrow: Charting the Financial Costs of Workplace Sexual Harassment. Institute for Women’s Policy Research. 2021. https://timesupfoundation.org/wp-content/uploads/2021/07/Paying-Today-and-Tomorrow_Charting-the-Financial-Costs-of-Workplace-Sexual-Harassment_FINAL.pdf

[4] https://hbr.org/2016/07/to-seem-confident-women-have-to-be-seen-as-warm

[5] https://www.sciencedirect.com/science/article/abs/pii/S0191308512000093

[6] https://fortune.com/2014/08/26/performance-review-gender-bias/

[7] https://www.forbes.com/sites/jacobwolinsky/2021/07/31/female-hedge-fund-managers-get-boost-from-are-less-confident-which-may-boost-returns/?sh=65e4dfd61796

[8] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf

[9] https://jfds.pm-research.com/content/4/1/11

[10] Sonya Drezler wrote a nice piece here on how to be a better ally to women in the workplace: https://www.solutionswithsonya.com/news/say-the-right-thing-how-to-be-a-better-ally