The new alpha
2023 was dubbed the Year of the Woman by the Washington Post. In pop culture, female powerhouses such as Taylor Swift and Beyoncé boosted US economic growth. The reality is that a significant proportion of the world’s wealth, will soon be in the hands of females.
It is estimated that by 2030, US women will control over 70% of the “Baby Boomer” generation’s wealth. The Centre of Economics and Business Research (CEBR) estimates women will control 60% of Britain’s wealth by 2025. This affects countries such as Japan and China where the one-child policy, and preference for a male child, has consequences that will be felt for two decades.
Research suggests that women have different investment goals and needs than their male counterparts – their desired alpha signature is likely to look different.
Rethinking the alpha proposition – an evolution in the investment industry
The investment industry needs to adapt and evolve to serve a growing female client base. We need to acknowledge differences but avoid stereotyping. An assumption based on gender, risks making donkeys of us all. There are useful guidelines/considerations to bear in mind when designing products geared toward women’s wealth.
1. It’s not all about my alpha - Social alpha.
The world is backpedalling on its UNSDG commitments when it comes to climate change and carbon emission targets. Many investors still have a desire to invest in a sustainable, socially conscious way. Women may have a more pronounced natural leaning toward investments which add to the good of society. The investment industry can ensure that it is aligned with goals which extend beyond narrow, self-serving interests. Only an inclusive and representative industry can hope to serve the needs of its client base and remain relevant. Asset managers have made a credible commitment towards gender equality and allocators, too, have a role to play. Asset managers can also tap into this potentially more-altruistic market, by finding opportunities which extend beyond the traditional asset classes. Private markets allocations have the potential to make a meaningful difference to society. Locally, investors have less ability to target a specific UNSDG or ESG goal, as niche-focused funds are less prevalent in SA than globally. Local funds with a broader infrastructure focus usually touch on a number of the goals which may lie close to the female investor’s heart.
2. But it is about alpha. Removed from the stereotype that women are naturally cautious investors, they may have a higher risk appetite and tolerance than their male peers. The reality is that women require a bigger nest-egg since they are likely to spend a longer time living in retirement.
According to the latest data, SA women are expected to live 6 years longer than men. with the proportion of SA households headed by women increasing to over 42.2% (2022) up from 41.1% in 2021. While SA is making progress toward the de- “genderfication” of roles, women in the workforce should be searching for higher risk-adjusted-returns.
Just as we need to look beyond the traditional types of investments when it comes to meeting “social alpha” investment objectives, women can look to non-traditional asset classes to meet their “pure alpha” goals. This may include investing in funds perceived to be racier, such as hedge funds or focusing on aggressive end of risk-profiled solutions for a longer period. Conventional wisdom suggests that these products are suitable for younger professionals, but women should consider investing in funds which cater to a high-return/higher-risk profile further into their working lives.
As women we can ensure that the industry adapts and evolves both professionally and socially by fostering an inclusive and supportive environment, making the pie bigger for all, regardless of gender.
