BUSINESS
03/18/2010 05:12 am ET Updated May 25, 2011

Naissance Capital: New Fund Invests In Companies With Female Managers, Anticipates High Returns

More than a year after overleveraging and mismanaged risk provoked a financial crisis that sent the global economy on a perilous downward spiral, analysts are still wrangling over its causes and implications.

But one recurring point of debate is whether a higher proportion of women in senior management positions could have forestalled the crisis. In other words, if women had run the banks, would they have taken on as much risk? Or, if women were better represented in jobs associated with risk-taking, would the economy be healthier?

At least one investment firm is betting on it.

Naissance Capital, a niche money management firm based in Switzerland, is set to launch its Women's Leadership Fund early next year. The Fund will only invest in companies where women are represented on boards and in management, and will take an "activist stance" against companies in which women are underrepresented.

So far, there are only a few funds worldwide that strategically invest in companies with a high proportion of female executives, and the Fund's portfolio managers contend that their investment strategy capitalizes on the advantages of female leadership and will lead to higher returns.

Their claim hinges on recent research, including reports issued by the consulting firm McKinsey and the research group Catalyst, demonstrating a correlation between female management and enhanced company performance. The McKinsey study held that "companies with a higher proportion of women in their top management have better financial performance" (although it didn't arrive at a causal conclusion). Also, two researchers at UC Davis found that men tend to trade more "excessively." In their study, men traded stocks 45 percent more than women, reducing "men's net returns by 2.65 percentage points a year as opposed to 1.72 percentage points for women."

Other research has pointed to an association between risk assumption and testosterone level. A British study suggested that traders with higher testosterone levels tend to take on more risk, and that testosterone can "even affect a trader's ability to engage in rational choice." Another study, published last summer by Paola Sapienza of Northwestern University, surveyed business students at the University of Chicago and showed that male and female students with the same amount of testosterone accepted similar levels of risk in experiments. But Sapienza said that on the whole, the women in her study were "more risk averse than men when it comes to making important financial decisions."

At least some industry leaders appear to agree with Naissance Capital's thesis that female management strengthens performance. Bank of New York Mellon CEO Bob Kelly has said that companies "that have done a better job at getting women into the executive ranks and developing women more effectively" yield "better client service and, ultimately, greater shareholder value over time."

Naissance's Women's Leadership Fund requires a minimum investment of $100,000 and will invest only in publicly traded companies. The firm says that 20 percent of the fees will be allocated to charitable donations for underprivileged women.

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