- There is no trade-off between diversity and investment performance.
- An extensive review of 56 studies over 28 years found consistent results.
- 45 of the studies focused on gender diversity, while 11 considered racial and ethnic diversity.
- Diversity was associated with outperformance in 26 studies, while 15 found no difference in performance.
- Seven studies associated diversity with underperformance.
- When it comes to risk, diversity was associated with lower risk in almost two-thirds of the studies.
- Studies on personal accounts found no difference in risk-taking between genders.
- Studies on professional investors had mixed results, suggesting other factors may be driving the outcomes.
Is there a trade-off between diversity and investment performance? According to an extensive review of 56 studies conducted over 28 years, the answer is no. The studies examined the relationship between diversity and investment risk and performance, with a focus on gender diversity. Out of the 56 studies, 45 focused solely on gender diversity, while 11 considered other forms of diversity, such as race and ethnicity, in addition to gender. The results were consistent across the board, regardless of the form of diversity analyzed.
Of the 56 studies, 15 found no difference in performance between diverse and non-diverse investment teams. Twenty-six studies found an association between diversity and outperformance, particularly in hedge funds, private equity funds, and venture capital funds. Seven studies associated diversity with underperformance.
In terms of risk, almost two-thirds of the studies found that diversity was associated with lower risk in investment portfolios. However, when it comes to personal accounts, studies found no difference in risk-taking between genders. Factors other than gender, such as risk tolerance and financial knowledge, may be driving the results. Studies on professional investors had mixed results, with some finding that women took less risk, while others found no difference or even higher risk-taking among women.
In conclusion, the evidence suggests that diversity and investment performance can coexist. Investors do not have to choose between the two. It is important to note that these findings are based on a comprehensive review of the literature and may not apply to every individual or investment strategy.
