On a chilly Thursday afternoon last month, several dozen women gathered at the Flywheel Sports spinning studio in Manhattan’s Chelsea neighborhood, donned tights and sneakers, and started pedaling.

Just your ordinary pre-weekend exercise class, right? Wrong.

The women were part of a growing collection of financial professionals called Women in ETFs, an industry group for 2,700 members who work in the exchange-traded fund industry. The event was a charity spin in support of Save the Children and involved satellite gatherings in Boston, Chicago and Washington. All told they raised over $5,000.

Beyond charitable fundraising, cycling offers an apt metaphor for the group. After all, its members are constantly pedaling for equal opportunities for women in finance, traditionally a male-dominated industry.

Today, just one in five investment funds globally is run by a woman, a rate that’s remained virtually unchanged since 2008, according to a study by Morningstar Inc. However, progress has been made in passive investing, where ETFs reside. Morningstar found that when women do get fund manager positions, odds are it will be for a passive product rather than active.

The trend goes back to the start of the ETF industry in the early 1990s.

“Back then, the ETF business wasn’t considered sexy and people had questions about the viability,” said Marie Chandoha, president and chief executive officer of Charles Schwab Investment Management, the firm’s second female CEO. “This wasn’t necessarily the sphere that men flocked into. So women were able to make it on the ground floor and grow in ranks.”
Passive Aggression

The odds of women running a passive fund compared with an active fund are 1.36 to 1, according to Morningstar’s Madison Sargis and Laura Pavlenko Lutton, who were the first to break down the global data of more than 25,000 fund managers in 56 countries by gender. The chances of women running passive funds are rising faster than the industry’s growth rate, the study’s authors wrote.

This turns out to be good news for women, as about $1 trillion in assets shifted to passive products from active last year alone with investors on the hunt for lower costs. Indeed, the market share for passive investing strategies is expected to surpass active by 2024, according to a study by Moody’s Investors Service in February.

Running a passive fund isn’t as simple as just tracking an index. Managers are constantly adjusting their allocations to ensure their portfolios are positioned to match their long-term goals. In addition, some ETFs don’t track the full index they follow, leaving the managers to select which securities are most appropriate to include.
Changing The Culture

So what makes ETFs more female-inclusive?

“There is something different about the ETF world,” said Deborah Fuhr, managing partner at the research firm ETFGI and a co-founder of Women in ETFs. “It is as competitive as other financial industries, but there is also room for partnership, mentoring and helping each other out.”

When Fuhr started looking into ETFs at Morgan Stanley there were 21 funds available, as most firms were just starting to launch their product suites. The women who began in the industry at the same time as Fuhr stayed, and as the industry grew so did their careers.

Still, there’s room for improvement, as women remain severely underrepresented as fund managers.

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