Making the bottom line case for diversifying investment industry

Beth Lilly, a senior vice president and portfolio manager with GAMCO Asset Management, sobered up the attendees at the fifth annual InvestMNt conference sponsored by the CFA Society of Minnesota with her featured speech on the first day of the two-day conference last week.

Her speech "59.4 percent vs 37 percent — who would you hire" was about the lack of women in the investment industry. The audience — overwhelming men.

Lilly's headline statistics are the returns of female-generated portfolios compared to male-generated portfolios from 2007 to 2015. During that time frame the S&P 500 index was up 55 percent. But Lilly pointed to more statistics across the investment industry that showed women outperforming men.

Lilly insisted the title of her speech isn't meant to draw gender lines but to build awareness that women are really good investors.

According to the website of Girls Who Invest, a New York-based nonprofit organization seeking to get more women in the industry, the number of women investment managers in the $15 trillion U.S. mutual fund industry has fallen from 10 percent in 2009 to 7 percent today. Even fewer women are in the private equity and hedge fund industries.

To turn that around, Lilly said the industry needs to shed its inflexible image and recognize that women have a different view of success.

In an internet-connected world the office expands beyond a desk and cubicle. Lilly can just as readily review a 10-Q, 10-K or proxy statement from her breakfast table as from her office. "Measure success by performance, not by office time," Lilly said.

She learned early in her career from legendary investor Peter Lynch that 75 percent of the job is artistic and 25 percent is science. "People need to view the investment industry as a creative field," she said.

Firms must also build a new pipeline of talent, tying compensation for managers to developing a diverse team. Lastly, she said it's important for women to find good mentors in the industry. Lilly said there are a lot of societal issues that pull women in many directions and lead women to have low self-esteem. Lilly benefited from good mentors in her career and she believes good mentorship and programs like Girls Who Invest can help women build self-confidence.

The mission of Girls Who Invest is to have 30 percent of the world's investable capital managed by women by 2030. It focuses on education, industry outreach, accessibility and career placement. "I think what they are trying to do is very impressive," Lilly said.

Lilly isn't trying to make it a competition between men and women. She believes in a mixed-gender approach to investment teams. "At the end of the day, the firms will generate higher returns from their portfolios, and clients will be happier," Lilly said. "It's better for society because the portfolios arguably should perform better."

"I'm coming at this from a capitalist viewpoint," Lilly insisted. "Women are great investors so we need to have more women in the industry, and oh by the way they are vastly underrepresented."

Independence and a hot product are proving a growth tonic for Arcserve of Eden Prairie.

CEO Mike Crest of the firm that makes data-security-and-backup software, said sales grew 41 percent (to around $150 million in revenue) and global employment has topped 500 employees and 150 contractors.

Privately held Arcserve, which doesn't release financial specifics, grew its market share by about 28 percent compared to industry growth of 5.5 percent, according to a recent report by Gartner, the computer-industry analyst and consulting firm.

Arcserve has won industry-analyst acclaim for its Arcserve UDP software, first introduced in 2015, that it describes as "a fully-integrated, set and forget backup and recovery solution."

Minnesota-born Crest teamed with Marlin Equity Partners, the California-based private equity investor in technology firms, to acquire Arcserve for about $170 million in 2014 from former parent CA Technologies of New York.

"We love being based Minnesota and recruiting in Minnesota," said Crest. "You've got to work at it [in a seller's market for quality people]. We have good people with rock-solid networks."

More than two-thirds of Arcserve's clients are foreign buyers. Client companies average 250 to 2,500 employees.