NEW YORK (FORTUNE) - Go to a conference of hedge fund managers, or a benefit, or just an old-fashioned booze-up, and it is obvious that something is missing: women.
The financial services industry isn't known for being particularly female-friendly; not many women are mutual fund managers either. But hedge funds represent the extreme edge of the spectrum. "It's Wall Street divided by 100," says Jacki Zehner, a former Goldman Sachs partner, referring to the percentage of women in the hedge fund industry. There are no hard numbers, but ask people to name women who run major hedge funds, and you often meet with an awkward silence. There are some, of course, such as Elaine Crocker, who is president of Moore Capital Management, and Tanya Styblo Beder, who is launching a new internal hedge fund at Citigroup, but few have their name on the door.
The fact of that is not in dispute. The why of it is. After all, the hedge fund business is supposed to be the purest kind of meritocracy. Male or female, green or purple: Results are all that count. Or at least that's the theory. Are women selling themselves short, so to speak, by opting out? Or is something else at work? The only easy answer is that there is no easy answer.
When reporting a story, I usually reach a point where I start hearing the same things again. Not this time. I talked to people at all levels of the industry and found little consensus. The truth is, one's views on working in a business dominated by men are often shaped by personal experience. (That's certainly true in my case.) That said, there are some recurring themes.
Most women in the business say that in the end talent really will trump all. But it is still a boys' club. Anna Nikolayevsky, who runs New York hedge fund Axel Capital, was in the middle of interviewing a young man to work for her when he interrupted to ask, "So who are the guys who started this fund?" Another woman manager recalls questioning in a large public meeting the CEO of a company whose stock she had sold short. The CEO repeatedly referred to her as "Miss," as in, "Well, Miss, if you understood our financials, Miss ..." Some investors simply are more reluctant to entrust money to a woman. "I have never hired a woman hedge fund manager, and I am leery of them," says someone who hires hedge fund managers for a living -- and happens to be a woman herself. Another woman has heard over and over from men that they don't like to work with women because they can't stand tears. (A friend of hers has a great retort: "I can't deal with watching you guys adjust yourselves all day!")
There's also indisputably a pipeline issue. Women make up only about a third of B-school slots. Then consider the percentage of those who survived and thrived in an investment bank, particularly in areas like trading, quantitative work, or fixed income, which seem to spawn many hedge fund managers. It's a small pool. "If you weren't there, you can't move on," says Patricia Young, chief investment officer of NewMarket Capital Partners, a fund of funds.
Few female applicants
There may also be something to the idea that women are just not as attracted to hedge funds. Christopher Morris, the director of MBA career management at Wharton, says women typically make up only eight or ten of 50 people attending a hedge fund presentation. Nikolayevsky says that only 5 percent of the résumés she's received are from women. Another woman who opened her own shop wanted to hire women -- but says she interviewed at least 12 men for every woman.
Nor do you see young women who work at more junior levels leaving successful shops to start their own firms, as do men -- in droves. "It is harder for women to take the jump," says one who did. A very successful male hedge fund manager says that it takes a "certain sort of delusional arrogance" to launch independently, and he thinks men have more of that than women. Others posit that women who are in a position to go out on their own may be more inclined to take their money and do something entirely new with it. One veteran male hedge fund manager says that a fantastic woman who worked for him left to get a doctorate in history, "and she never looked back." He adds, "I've never had a male analyst do that."
There's moderate disagreement on all those issues -- but there is passionate disagreement on two others. One, not surprisingly, is the notion that you can't run a hedge fund and raise children. "The demands are not compatible with family life," says one former (female) analyst who joined a hedge fund. Investors put money into a hedge fund for one reason: the manager. So what happens, as one woman portfolio manager puts it, "if this person is hit by a bus?" She adds, "That's a legitimate question. But people look at pregnant women or women with kids as if they've already been hit by a bus."
For every woman who says that the issue of children is real, another will say that it's just an excuse to discriminate. And others argue that managing a hedge fund may be more compatible with family demands than investment banking or consulting, where you may have to fly to Japan at the drop of a hat.
The other question, which is almost as controversial, is whether women manage money differently from men. You'll hear that women are more intuitive, that women are more detail-oriented, and -- most of all -- that women have a different attitude toward risk. Women are more likely to say, "What's my downside?" says Berna Barshay, who runs the Ingleside Select fund. "There's less hubris, and there's more 'What am I missing?' " The notion of difference is a double-edged sword. It may be why women don't blow up, à la Long-Term Capital Management, but it can also -- or so the argument goes -- be why women don't typically score the outsized returns that lure investors.
One study, "Boys Will Be Boys," by University of California professors Terrance Odean and Brad Barber, in essence shows that male investors suffer from overconfidence: They trade much more than women do, and that trading reduces their returns.
But then there's the real-life experience of one man at an investment advisory firm. After reading a book called The Tao Jones Average, he decided that women should be superior investors not just because of their attitudes toward risk but also because of their intuition and ability to judge character. He bought into his theory by backing about a dozen women portfolio managers. Overall, while some managers did quite well, most delivered average returns. And, he says, "I was disappointed," because they behaved exactly like male investors.
Even if you believe that the lack of women in hedge funds is solely a matter of personal choice, change would still be good. Hedge funds, after all, are an important force on Wall Street. What are the odds women will jump in? A group called 100 Women in Hedge Funds now has some 3,000 members, although the complaint is that many of them are in marketing and client services, not on the investment side. Zehner and Carrie McCabe, the CEO of FRM Research, plan to organize women in the industry via a network that will be part of the National Council for Research on Women. But they're facing a stiff headwind. With returns of many hedge funds sliding, some say the industry is not about to embrace outsiders. "When times are tougher," says one veteran, "people protect their own."