Diversifying Risk, and Risk-Takers, in Investment Management

Diversifying Risk, and Risk-Takers, in Investment Management
CATEGORIES: Viewpoints

Diversifying Risk, and Risk‑Takers, in Investment Management

PIMCO’s new partnership with the organization Girls Who Invest is one more step toward a more inclusive financial services industry. It is also an act of conviction: At PIMCO, we believe that promoting diversity is more than simply the right thing to do from a moral, social and business standpoint. It is also the right thing to do for our clients’ portfolios. We believe a diversity of perspectives on an investment management team sparks innovation and uncovers the best solutions to help clients achieve their objectives.

Taking risks

Investing is about taking calculated risks. A portfolio represents the accumulation of numerous investment decisions (buy, sell, hold, when, where, what price), each informed by a rational assessment of the risks balanced against the potential rewards. Understanding, managing and diversifying risk is critical to optimizing long-term portfolio outcomes.

To ensure fewer risks and opportunities are overlooked, and to ensure an informed, innovative and broad range of perspectives is driving portfolio decisions, investment teams – from portfolio managers to research analysts to business leadership – should encourage and embody diversity of thought. This manifests in diversity with respect to not only gender but also ethnicity, education, background, age, personality attributes, management approaches, and more. Diversity can counteract the forces of unconscious bias and “groupthink” to optimize outcomes for portfolios.

This makes intuitive sense, and it’s supported by research: A Northeastern University study1 of over 9,000 hedge funds from 1994–2013 found that of the funds still in existence at the study’s conclusion, those with at least one female portfolio manager outperformed the exclusively male-managed funds while taking on similar levels of risk. (The authors also noted that difficulty in raising capital meant that female-managed funds failed at higher rates over the study period; as the authors put it, “Only the best performing female managers manage to survive.”)

Looking at business results more broadly, a 2018 McKinsey report2 found that the companies with the most gender-diverse executive teams were more likely to have above-average profitability than the least diverse companies by 21%.

In our opinion, it’s clear: The financial services industry needs more women making those investment decisions, taking those calculated risks.

A place on the trade floor

If you’d asked me what I envisioned for my career when I was in college, I was fairly certain I did not want to be in a risk-taking seat because the prevailing sentiment among my classmates was that a trade floor was a very macho and tough work environment for women. But I realized after a couple of years in the industry that risk-taking is actually what I want to do.

Today, I’m happy in my current role on the trade floor as a portfolio manager. My decisions contribute to portfolio positioning, and my analysis of broader risk factor exposures and market trends informs decisions across the firm (for example, please see an article I coauthored, “Asset Class Correlation: Untangling the Web”).

I want to see more women become investment professionals and leaders in our industry, and I want more women to know they can succeed in these roles. In the end, it’s our clients who stand to benefit from a diverse range of perspectives.

The mission: Girls Who Invest

The nonprofit organization Girls Who Invest (GWI) takes an innovative approach to closing the gender gap in investment management. GWI has a clear “30/30” vision: 30% of the world’s investable capital managed by women by 2030. The organization’s goal to educate college women about investing and risk-taking roles is hugely important in increasing both the supply and demand of talented women in our field. GWI provides an intensive education program, arranges internships with leading investment management firms and offers ongoing support in a vigorous community.

I wish this program had been available when I was in school, and today I’m honored to represent PIMCO on GWI’s advisory board. PIMCO’s partnership with GWI will also bring college women to our trade floor for internships, and I’m excited to see what their unique perspectives will contribute to our investment process.

More insights, analysis and decisions from talented women will help PIMCO manage risks and create opportunities for our clients across market environments in the years and decades to come.

Vicky Zhao is a U.S. rates portfolio manager on PIMCO’s liquid products desk. She serves on the advisory board of Girls Who Invest.

Girls Who Invest (GWI) is a nonprofit organization dedicated to increasing the number of women in portfolio management and executive leadership in the asset management industry. PIMCO’s partnership with GWI is an integrated effort among PIMCO’s Inclusion, Diversity & Culture (IDC) initiative, the PIMCO Foundation and the firm’s talent management team.


1 Rajesh K. Aggarwal and Nicole M. Boyson, “The Performance of Female Hedge Fund Managers,” Review of Financial Economics, April 2016. Northeastern University D’Amore-McKim School of Business Research Paper No. 2726584.

2 Vivian Hunt, Sara Prince, Sundiatu Dixon-Fyle and Lareina Yee, “Delivering through Diversity,” McKinsey & Company, January 2018.


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