Hedge Funds Fall Flat When It Comes to Diversifying Ranks

The place might sound like a Wall Street throwback: Men do the trading. Women do the marketing. Not a single investment employee is Black. But here’s something even more remarkable: none of this is so remarkable at all.

Like most hedge-fund firms, this one, Solus Alternative Asset Management of New York, declined to discuss its roughly 50-person workforce, or how and why it hires who it does. In fact, hard numbers are difficult to come by all across this hush-hush business — which tends to be how hedge funds like it.

Intensely private, free of public stockholders and typically shielded by strict work contracts, many firms are able to operate much like the Wall Street partnerships of old. Many women and people of color say the effect, intentional or not, is a system that often favors white men and perpetuates the divides in the industry. {snip}

The numbers tell the story: not one of the nation’s 30 largest hedge funds is run by a woman or a person of color. Most women- or Black-owned firms have less than $500 million in assets under management. Many have far less.

Firms including Renaissance Technologies, DE Shaw & Co., Two Sigma Investments and Millennium Management declined to discuss or give data about the diversity of their investment teams. Industry insiders say while these giant firms may have diversity efforts, the percentage of women and African Americans in investing roles is still low. And that under-representation is even more acute at smaller firms, which have fewer staff and are more likely to recruit from tight-knit social circles.

Well-known shops such as Tiger Global Management, Light Street Capital Management and PointState Capital have very few or no women or Black people helping to manage money. The entire leadership team listed on the website of Aristeia Capital, which was founded in 1997, is made up of white men. Over at Sculptor Capital Management Inc., just six out of its 45 U.S. managing directors are women and they’re all in non-investing roles. Only one is African American.

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Women- and minority-owned hedge funds controlled less than 1% of total industry assets in mid-2017, according to a report by Harvard Business School professor Josh Lerner.

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One common refrain from the industry is that the pool of incoming talent is too limited for hedge funds to rapidly increase their diversity. But those who’ve worked on the problem for decades say firms aren’t always using resources available to them.

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Some on the client side have started to take action. Cambridge Associates is seeking to double its investments in minority managers, adding $20 billion in allocations.

While most firms declined to share data, three of the industry’s biggest, Point72 Asset Management, Citadel and Bridgewater Associates, did provide figures.

About 40% of U.S. staff at Point72 and their training Academy were diverse in 2019 — that includes investing and non-investing roles of women, and people of color, including the industry’s better-represented Asian and South Asian populations. At Citadel it’s more than 50%.

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At Bridgewater, about one in four investing roles is held by a minority, and nearly one in five is a woman. The firm is “looking to build on our existing diversity and inclusion efforts, and expand them where relevant,” spokeswoman Ryan FitzGibbon said.

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