Women Make Inroads in One of Europe’s Fastest-Growing Debt Markets

(Bloomberg) -- One of the fastest-growing corners of European debt investing looks set to be increasingly shaped by a class of fund manager that's currently underrepresented: Women.

The number of female investors hired in European distressed debt and special situations has doubled to 12 in the first three quarters of 2018, according to a report from headhunters Paragon Search Partners.

That may not seem like much -- 88 men were hired to similar roles which suggests the industry still has a long way to go. But trading the debt of companies under stress was until recently one of the most male-dominated areas of finance.

“Historically the tight-knit distressed-debt community has been almost a game of musical chairs,” said Anthony Robertson, the chief investment officer of Cheyne Capital Management's recently formed distressed-debt business. “The industry has represented a traditional club mentality, but that's changing.”

Growth Industry

Distressed debt investing is tipped to boom by investors and recruiters alike as central banks turn off the monetary taps that kept companies awash with cheap cash for a decade. A rush to hire new talent has forced firms to look for staff in industries where women are better represented than in finance, such as consulting and law, Robertson said.

Pemberton Capital Advisors, which focuses on private debt and direct lending to European companies, is among firms that have increased their female headcount, growing to 15 from two in the past couple of years. The compliance, legal and credit-risk functions at the London-based asset manager are all led by women.

“Many firms are looking to increase diversity of thought which typically happens when you have a more balanced mixture of genders and backgrounds,” said Nicole Gates, chief credit officer at Pemberton with more than 30 years' experience in the market and who specializes in restructuring and recovery strategies. “When I started in distressed debt, there were almost no women involved at all and it is still an area where women are underrepresented.”

There's evidence that a better gender balance can improve performance - fixed-income mutual funds run by women have outperformed funds run by men since 2003, according to Morningstar Inc.

While women are underrepresented in many areas of finance, it's particularly pronounced in this market because their arrival in the industry has coincided with financial calm of recent years. This means that as markets start to turn sour, more men can point to experience gained during a financial crisis on their resumes, according to Gates at Pemberton.

“A problem is that the growth of women in financial services happened in the last 10 years when markets were benign,” she said. “Those women don't have experience in restructuring.”

Low Base

Women currently represent 9 percent of investment professionals in the distressed-debt market, according to the research from Paragon. Even if the rate of female recruitment has doubled, the net change in female headcount was just three this year and zero last year, the research shows.

Paragon published the data in response to receiving more questions on gender diversity in meetings. With the #MeToo movement and major companies dealing with PR crises from sexual harassment this year, the topic of women in the workplace has become a more commonplace discussion, including in financial markets.

“There is a desire throughout the institutions to address the imbalance, but it's unclear how to effect real change,” said Andrew Perry, managing director at Paragon in London. He suggests firms look to new graduates straight out of university to boost female headcount.

“The talent pool is limited for women in both banks and funds and the answer may be to target universities,” he said.

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Chris Vellacott

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