[Republished from AlphaWeek]
Start-Up Female Investment Managers Get New Ally
by Greg Winterton
For the small percentage of women who decide to enter the investment management industry, from a statistical perspective, their line manager for their first job will be a man. When they get promoted, again, statistically, they’ll report to a man. For the even smaller percentage of women who take the plunge to start their own investment management firm, the lawyer sat across from them who is helping with the fund formation documents and PPM will be…a man.
Such is the way of the male-dominated world of investment management. Now, though, women looking for help with launching their own firm have a different option.
Jessie Gabriel is Founder of All Places, a New York-based business and legal strategy firm. Gabriel is formerly head of the funds group at Baker & Hostetler LLP, and says that the decision to start her own advisory firm is rooted in what she believes is the fundamental hurdle preventing women being better represented in the investment management industry.
“The longer I was in this field, the more I saw the very real link between cultural and financial equality. You won’t achieve proper equality unless you can achieve financial equality. I want to help other women to manage more money because that’s what I believe will really provide the impetus for broader equality. And the fastest way to get there is through ownership - women making the decisions and reaping the rewards.”
One of the ways Gabriel says she will be helping new female fund managers to get their firms off the ground is the fee structure. Law firms have long billed clients by the hour, a structure which, for start-up firms in any industry, means that costs can run up quite quickly, something that isn’t necessary in the very early days.
“We work on a fixed-fee basis that’s project-specific so that people can budget for it,” said Gabriel. “And certainly, in our view, for a start-up fund manager, you don’t really need many legal services at the outset. Of course, you need a pitch deck and a term sheet so that you can take that to potential investors. But you don’t need to spend huge amounts on legal fees just to get going. You should test your thesis in the market first.”
For those women fund managers who are seriously considering launching their own firms, Gabriel says that one of the questions they should be asking themselves revolves more around their capacity to sustain the business.
“For allocators looking to invest in money managers, one of the requirements might be a 3-year track record. Some allocators will look at your track record from your previous shop, but some won’t. It’s a long road to closing, and even then, any significant benefits, particularly for private market investors, may not start coming in for years. You have to think about the financial commitment that’s necessary to run an investment management business,” she said.
The investment management industry has many initiatives to highlight women-led investment management firms, like 100 Women in Finance’s recent Global FundWomen week, a digital event which connected institutional investors with women fund managers – at no cost. Gabriel welcomes these types of initiatives but says that much more is needed.
“I think it’s a terrific initiative, but what we need - and I’m sure 100WIF would agree - is a million of these events,” says Gabriel. “Across the LP world, a lot of lip service has been paid to supporting female managers. But what we need to see is less talking and more check writing. Hopefully, events like these, and the efforts of exceptional campaigns like FundWomen, PEWIN’s Project Pinklight and All Raise, will result in these checks being written and cashed.”
For women launching non-asset management firms who want to get in front of a venture capital firm to raise seed capital, the challenges are similarly stark.
“A lot of early stage investing is gut investing based on the founder. Do I trust them? Will they go out there and kill it? It’s hard to see past your unconscious bias when your gender and life experiences are different. When a woman walks into a room and sits in front of a group of venture capital partners, in all likelihood they are men. Even if they are really conscious of their biases, that’s the best-case scenario,” says Gabriel. “But not investing in women-owned companies isn’t smart investing. 50% of your end users are women. There’s an economic loss from not doing it.”
Despite the challenges that women face starting their own companies, whether they be asset management ones or not, Gabriel is seeing encouraging trends from multiple directions.
“I am seeing more women launching their own fund management companies, and more younger women are doing it, too,” she said. “There have always been women working within larger organizations thinking ‘I can do this better myself.’ But there were other things holding them back, some of which are gender-specific and some of which aren’t. First, what I have seen anecdotally in the US from the Trump presidency is that women have become invigorated through adversity. We’re asking ‘What are we going to do to support one another?’ I do think because of these disruptive experiences there are more women saying ‘hey, I can do this’. And the Covid situation has also provided some impetus in my opinion. A lot of the assumptions that we were living under pre-Covid have changed, and women think that they can start a company to take advantage of disruption. And they can.”