Diversification (Workforce Edition)
Diversifying Strategies vs Diversifying Workforce
Harry Markowitz is reported to have said that “diversification is the only free lunch in investing”. This is the notion that holding a broader range of assets can yield better returns without assuming more risk.
The same can clearly be said of strategy, with the recent growth of multi-strat funds putting them in the top spot as the most prestigious and often most lucrative places to work in finance. The current economic and geopolitical environment has seen specialised funds tapping into new asset classes and strategies to offset volatility and sustain robust returns.
It’s time the same notion was applied to diversity within the workforce.
While diversity of thought and approaches to investment are tougher to quantify, they are critical in building diverse portfolios. Beyond the social and ethical arguments in its favour, a greater variety of perspectives is clearly beneficial when addressing the growing complexity of global challenges.
“Just from a research point of view, cognitive diversity is great in an investment process. You have people from different backgrounds and with different mindsets who therefore challenge each other and ultimately make the better investment decisions” – Robert Howie (Mercer Investments)
Rising Evidence and Industry Challenges
Despite rising evidence in its favour – WTW report in early 2023 found that investment teams in the top quartile of gender diversity outperformed the bottom quartile by 45 basis points (net excess returns)– buy-side firms appear to struggle to meet diversity initiatives.
However, with a recent study into diverse hedge funds proving that investors are allocating more capital to diverse funds, pressure on hedge funds to take proactive measures will rise.
There is a tendency to use the lack of women and minority talent within the space as an excuse for slow progress, rather than to address the root causes. Globally, women obtain 53% of STEM university degrees (Sirimanne 2019), but in the EU only 34% of graduates in the field are women (Girls Go Circular 2022). This indicates an inability to capitalise on talent from the point of graduation which, given the high demand for engineers in funds worldwide, seems like an expensive oversight.
Retaining Diverse Talent
Failure to retain talent up to the senior level is another issue. An increase in diversity at the leadership level has a trickle-down effect, with data showing an average 50% increase in the proportion of women at firms where women held a substantial economic stake.
Another factor in both talent attraction and retention is the reluctance to take a proactive approach to inclusion. Welcoming applications from diverse candidates yields limited impact unless the workplace is actively inclusive.
We’re starting to see some clients cultivate tailored benefits packages to address this, with support for primary caregivers and flexible working styles removing barriers to entry for many.
Moving Forward
Ultimately, the industry is moving in the right direction, but at the wrong pace. There needs to be a collective effort to tackle barriers to entry for diverse candidates and foster development before the industry reaps the benefits.
How exactly to do that is still up for debate, but the right steps are being taken.
Written by Caitlin Mulholland
Crypto Corner
NEW BTC ATH?
The current Bitcoin all-time high is around $69,000 – achieved in November 2021. Currently, Bitcoin is trading at around $68,000 and is slowly approaching a price that will put all holders into profit.
So, what’s happening? Well, as of March 4th 2024, net inflows of $7.35 billion have been invested in US Bitcoin ETFs since their debut in January 2024.
The Bitcoin Halving is 44 days away, which means the mining rewards will be reduced from 6.25 BTC/block to 3.125 BTC/block. At around 144 blocks mined per day, that means the supply will increase just by 45 BTC/day.
Are retail investors even present in this? Google Search Volume is 23 in Feb, nothing compared to 65 in 2021, so there might be even more to come.
Safe to say we are looking at an increasing demand and a decreasing supply. Enjoy the ride.
Written by Danny Placinta
Market Headlines
The UK Law Commission is consulting on a bill that will plug a gap in the country’s laws. The bill will clarify how digital assets can be treated as property under the law. Otherwise, the commission believes the country’s legal system is flexible enough to accommodate crypto — giving the UK an edge.
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