Greater gender diversity in an investment team can add 45 basis points per year in net excess returns, an analysis by Willis Towers Watson showed.

The consultant’s new research paper, Diversity in the asset management industry: on the right track, but at the wrong pace, analyzed investment strategies across equities, credit and real assets, and cover global, U.S. and other regions.

Using diversity data as of Dec. 31, 2021, and net performance data as of Dec. 31, 2022, WTW looked at more than 1,500 strategies across managers. Managers were based around the world. Relative performance was against a manager’s self-selected preferred benchmark or the 3-month Sterling Overnight Index Average interest-rate benchmark.

The analysis found that investment teams in the top quartile of gender diversity outperformed the bottom quartile by 45 basis points per year. The top quartile comprised investment teams with the highest proportion of a team reporting as non-male.

By asset class, equity and credit strategies showed a gender diversity premium of 46 basis points and 14 basis points per year, respectively. Regarding real assets, the universe for analysis was smaller than the other asset classes and there were some challenges with sourcing performance net and gross of fees — now a requirement for global data disclosures, said Chris Redmond, head of manager research at WTW, in an email. However, the current data the consultant has “is aligned with the overall trends,” Mr. Redmond added.

WTW will, in future, provide additional insights into diversity data through its diversity index, which measures any strategy’s diversity vs. where it could be in terms of being broadly represented by all genders and ethnicities. Starting this year, WTW will track the index for the industry, the research paper said.

The index will also allow WTW to monitor the diversity premium at a more granular level over time.

WTW also collated data from 407 money managers on diversity, equity and inclusion, finding that 42% of respondents currently have measurable objectives in their DEI policy. Almost half (49%) have no targeted initiatives to attract more diverse senior talent, the paper said.

However, 40% of managers said they were measuring the gender and ethnicity pay gap, and 38% are measuring the bonus gap — the difference in pay and bonus between men and women at certain levels. Further, 56% of managers are members of industry diversity initiatives.

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