In the past few weeks, two women took on powerful positions in the financial services. First, Ana Botin became chairman of Spanish bank Santander, following the death of her father Emilio. Then Abigail Johnson replaced her father Ned as chief executive of US fund management firm Fidelity. Botin is the sixth generation of her family to run the bank, and Johnson is the third of hers to head their business.
This shows just how important it is for the financial services to have family firms in their sector, because being the successor in a family-owned business is one of the few ways for women to come into positions of power in the City. It matters because the financial services are still too male.
When Labour MP Harriet Harman said the financial crisis would never have happened if Lehman Brothers had been called Lehman Sisters, she was tapping into a common criticism of the financial sector: that it is too macho, too aggressive and too male. Stories that emerge now and then about male traders injecting themselves with testosterone only reinforce the view.
If there were more women in the City, goes the Lehman Sisters argument, it would be more risk-averse, less gung-ho and frankly better at doing what society wants finance to do: protect and grow savings, and invest in good businesses. Even if you don’t buy that, you might agree that a little bit of diversity would be a healthy thing on the trading floor.
But was Harman right? Quite possibly. Several studies have shown that women make better investors than men in the long term. A study of 35,000 non-professional investors published in the Quarterly Review of Economics in 2001 found that women got better returns, largely because men changed their investments 45 per cent more, incurring higher fees that ate into their returns.
Another piece of research recently found that hedge funds run by women returned 9.8 per cent in 2013, compared to the industry average of just over 6 per cent. And in a 2011 a report, Barclays Capital found that hedge funds run by “women and minorities” returned a cumulative 82.4 per cent, compared to 51 per cent for “non-diversity” funds. This is hardly conclusive, and the lack of women in trading jobs makes it difficult to study performance in any depth. Just over 3 per cent of hedge funds are run by women, according to the Barclays Capital report, and one reason for the outperformance could be that they tend to work in smaller funds, which are more nimble.
But you might well argue that anything that gets women into decision-making positions in the financial services must be good. There are still precious few women on lists of top traders. Ask people to name one, and they might mention fund manager Nicola Horlick, although her nickname “supermum” is surely designed to remind her that in the eyes of the media and her colleagues, motherhood (not money-management) is her first duty.
Or they might mention Mina Gerowin, who is best known for working with hedge fund manager John Paulson when he made his infamous bet that mortgage-backed securities would implode. She left Paulson in 2012 and, interestingly, now works for several companies including Exor, the Fiat holding company, South Korean electronics giant Samsung and French cement business Lafarge – all of which are family-controlled businesses.
Financial services is probably the sector where the wisdom of shareholders and the market are championed most. Family firms are seen as inefficient, clanking, Heath-Robinson sorts of businesses. But sometimes, despite their supposedly arcane ways, family firms can be better at creating good outcomes than the market.
Quotas for women on boards have spread from Norway to the UK to Malaysia. This will probably change things in the long run. But as the cases of Botin and Johnson show, family-owned firms are still one of the best mechanism for propelling women into positions of power, even in the most male-dominated of sectors. Those who believe in stable, long-term capital might wish for more of the same.