rethink sustainability
Do women investors really think differently to men?
Women are about to take control of far more of the world’s wealth. They are expected to inherit much of the USD 68 trillion that the baby-boomer generation will pass down1 as the so-called “Great Wealth Transfer” unfolds over the next 20 years. This could have implications for the way money is invested: a Lombard Odier survey of our female clients and business partners shows a clear preference for sustainable investments among women, with 80% believing they will outperform or match more traditional investments.2
There are also indications that women try to invest in women. A quarter of investment by female angel investors goes to female-led companies, according to UK campaign group Women Backing Women3 – that’s more than double the share heading to female-led companies across the UK as a whole4.
Why does this matter? Female-founded companies have been shown to deliver an average of 10% more revenue over a five-year period than male-founded companies, and to generate 78 cents for every USD 1 of investment – far above the 31 cents that male-founded start-ups are producing.5 Yet companies cofounded by women are attracting less than half the investment of those started by male entrepreneurs – USD 935,000 compared with USD 2.1 million, according to Boston Consulting Group (BCG).
The reasons include the fact that men tend to “overpitch and oversell”, while women lean towards more conservative projections, and may even ask for less investment than men. The male-dominated nature of the venture-capital world can also create obstacles. Women show more of a tendency than men to create products related to things they have personal experience of, such as childcare, BCG says. Male investors can fail to understand or see the potential in these ideas, in the same way as sometimes happens with businesses targeting socio-economic groups that investors do not belong to.
Examining the investment behaviour of women
Alongside an attraction to responsible or sustainable investing, women investors tend to have a more moderated approach to risk, according to numerous studies6. The reasons for this? A mix of biology, genetics and stereotypes around social identity all come into play, researchers believe. Women also regularly take a more “disciplined and considered” approach than their male counterparts, according to Reuters, which cites statistics showing that women make higher use of stop-loss orders to reduce risk.7
This attitude to investing was also revealed by a three-year study of 2,800 investors run by Warwick Business School (WBS)8 in the UK. It found that women traded an average of nine times a year, while men did so 13 times. This was the largest difference between genders for any of the metrics in the study, which showed women outperforming the FTSE 100 by 1.94 percent – a significant 1.8 percentage points higher than their male counterparts.
Frequency of trading is not the only differentiator, however. Men also often show a more speculative investing style, the WBS study showed, while women tend to do more research before making investment decisions9. Men may be more attracted to lower-priced shares because of the potential for significant increases in value; they have also been seen to hold on to shares whose value has dipped, to avoid incurring losses, while selling off those that have risen in value so they can realise their profit.
Read also: Top three traits of female investors
The effects of the gender pay gap on investment
What are the reasons for these differences in women’s and men’s investment styles? There is no single or simple answer, but the historic gender pay gap is regularly cited as a reason for women and men having different attitudes towards money.10 Research suggests that women around the world would invest more if they had higher levels of disposable income.11
In the EU, women earn an average of 13% less than men.12 In Switzerland, the gender pay gap is widest among the highest earners, at 16.8% for those in top, upper and middle management roles.13 In France, the average gender pay gap is 15%,14 but in Paris – where salaries are highest15 – the disparity expands to 21%16. In the UK, the pay gap averages 14.3% but is far higher among women over 40, which can be explained by maternity leave being shown to have long-term impacts on salaries and career progression17.
“Gender pay gaps are seen all around the world, and if women have less money than men, their attitude towards it is almost certainly going to be different,” says Ebba Lepage Lombard Odier’s Group Head of Corporate Sustainability and a member of the Bank’s Gender Diversity Committee. “Lombard Odier is committed to offering equal pay to women and men for the same work. We also offer longer paternity leave than the legal requirement in Switzerland, have globally high post-maternity leave retention rates, mentorship programmes for women, and have received increasingly higher levels of EDGE certification for our work on gender equality.”
Read also: Bettina Ducat appointed co-head of Lombard Odier Investment Managers
Promoting equal opportunities in investment
Gender gaps are having an extensive impact on the world economy, according to the World Economic Forum.18 Moving towards more equality in terms of salaries and career progression is increasingly seen as a critical factor in boosting financial stability and economic performance, it adds. This is backed up by Lombard Odier research showing that women’s primary priorities when investing are not making quick returns to benefit themselves, but preserving wealth for the long term and passing it down to the next generation.19
If women invested at the same rate as men, this could generate USD 3.2 trillion of extra capital to invest globally, according to research covering 16 global markets.20 But raising salaries is not the only barrier to making this happen. Education is needed on two fronts – to make more women feel they have the tools they need to start investing, and to change perceptions within the asset management industry about the people they should be targeting.
In our survey of women clients, nearly 40% said their limited knowledge of private assets prevents them investing in this area. Other research shows that only 28% of women feel they have enough knowledge to confidently start investing.
In terms of the other educational needs, nine out of ten asset managers report that they automatically target men, and 73% believe that having more female fund managers would help attract more women investors.21 Shifting these statistics so that women have better access to investment markets will benefit everyone.
Read also: Lombard Odier partners with Women in Finance research programme
“At Lombard Odier, we value equality of opportunity,” says Managing Partner Alexandre Zeller. “The financial sector has traditionally been male-dominated, so we were proud to be the first Swiss bank to receive EDGE certification in 2014, and to have recently begun a partnership with the Women in Finance research programme. We aim to keep improving our gender diversity so that we reflect our client base, and all of society.”
* Image courtesy of FT HTSI; Editor Jo Ellison; Style Director Isabelle Kountoure; Photography by Tess Ayano at East; Model Aymeline Valade at VIVA Model Management; Casting by Ben Grimes Casting at DriveRepresents.com; Hair by Alexander Soltermann at Home Agency; Make-up by Tiziana Raimondo at Home Agency; Production by Silvia Le Lay-Nicoletti at Town Productions; Shot at the historical headquarters of Lombard Odier Bank in Geneva, Switzerland
1 Why the $68 trillion great wealth transfer is an opportunity for women (cnbc.com)
2 Lombard Odier survey on women and investing
3 Women Backing Women - UK Business Angels Association (ukbaa.org.uk)
4 Inside the Women Angel Investment Taskforce (thegenderindex.co.uk)
5 Why Women-Owned Startups Are a Better Bet (bcg.com)
6 Risk tolerance of men and women | CEPR
7 Closing the gender investment gap: Why women typically trade less than men – and why that may be changing (reuters.com)
8 Are women better investors than men? | News | Warwick Business School (wbs.ac.uk)
9 The Secrets of Women Investors | Kiplinger
10 Financial Risk-Taking and the Gender Wage Gap - ScienceDirect
11 BNY Mellon Investment Management: It's time to create a more inclusive investment world
12 Gender Pay Gap in the EU remains at 13% (europa.eu)
13 Wage gap | Federal Statistical Office (admin.ch)
14 Joining Forces for Gender Equality (oecd.org)
15 Average Salary in France (wearedevelopers.com)
16 Wage disparities between women and men in Paris | Apur
17 Do Longer Maternity Leaves Hurt Women’s Careers? (hbr.org)
18 Global Gender Gap Report 2023 | World Economic Forum (weforum.org)
19 Lombard Odier survey on women and investing
20 BNY Mellon Investment Management: It's time to create a more inclusive investment world
21 BNY Mellon Investment Management: It's time to create a more inclusive investment world
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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