Issued October 12, 2016
WASHINGTON, D.C.–Although research shows that diversity yields positive performance and returns in capital markets, minorities remain underrepresented in this industry. A new joint report from The ReFund America Project, Roosevelt Institute and Service Employees International Union finds promoting diversity may not be a priority for major consulting firms managing our nation’s pensions, largely due to their lack of diversity to identify and promote emerging managers.
“Casting a wider net: Increasing opportunities for minority and women owned asset managers in institutional investments” findings are based on a survey of investment consultants representing more than $1.3 trillion in assets under management. This report aims to explore the reasons why these disparities exist and what industry leaders can do to address them. Consulting firms often serve as gatekeepers between pension funds and asset management funds and therefore play a critical role in promoting diversity.
The basic findings of this report are:
• There is a lack of diversity at major consulting firms, especially at the senior management level. Minorities–especially Blacks and Latinos–are vastly underrepresented at pension fund consulting firms; making up less than 6 percent of the consultant workforce. The representation of Black and Latinos employed at consulting firms falls even below percentages in other occupations in the financial industry and represent approximately 4% of all management within the firms surveyed.
• Promoting diversity may not be a priority for consulting firms where there are no systems to identify and promote emerging managers. Only five of the surveyed firms tracked data on the number of minority asset managers that were ultimately selected to manage investors’ funds.
• Several themes emerged repeatedly when firms identified challenges to recommending minority and women asset managers. Beliefs—such as there being a lack of qualified minority-owned asset managers or that emerging managers deliver subpar performance—remain barriers to diversity throughout the investment field.
“As in much of the financial industry, there is a lack of diversity in asset management and the broader capital market that leaves communities of color underrepresented,” said Saqib Bhatti, Director of the ReFund America Project and Fellow at the Roosevelt Institute. “This weakens the worldviews of decision-makers and it is our hope that this report, combined with our recommendations, will serve as a starting point for further research on diversifying the capital markets.”
“Our nation’s public, corporate, faith-based and labor union pension funds have long provided innovative thinkers with the financial clout to bring about a more equitable and sustainable economic growth,” said Carrie Sloan, Senior Research Analyst at the ReFund America Project. “By promoting diversity in the financial services industry, we will help ensure the most informed possible decisions from the fullest array of voices are being developed.”
"Diversity has been shown to create long-term value for investors," said SEIU International President Mary Kay Henry. "What this report shows us is that investment consultants can identify new and innovative strategies to both promote women and men of color as asset managers and create that long-term financial value."