In a two-part roundtable discussion in June, Pensions & Investments convened a group of executives from across the institutional asset management industry to consider how to accomplish diversity, equity and inclusion and what benefits it brings to investors.
It is clear from those conversations that work remains to be done — especially to address the barriers built into the systems — and that fiduciaries should be considering the racial, ethnic and other kinds of diversities of the managers they employ in order to ensure true portfolio diversification.
As Jasmine Richards, who leads diverse manager research for Cambridge Associates LLC, said: "The way that we see it is that diversity is an asset, a tool that particularly money managers use to increase performance."
Ariel Investments' Rupal Bhansali, CIO for international and global equities, made it clear why diversity matters, citing research from professor Scott Page at the University of Michigan that found "diverse teams come up with better solutions to the most complex problems. And so unless people think that investing is not a complex problem to solve, I think diversity is sort of a must-have, not a nice-to-have."
While steps are being taken — through emerging manager programs and legislated diversification targets for some public pension funds — the roundtable speakers made clear that there are certain biases baked into the system that need to be addressed. Among those identified were track record and measurement of team tenures as a sign of team cohesion.
Getting firms owned by minorities, women or individuals with disabilities to the table can be difficult if asset owners demand a 10-year track record or if their teams don't have decades of tenure, all of which can undermine inclusion efforts.
It is time for the smart, capable people in this industry to dig in and find new evaluation metrics that enable all asset managers with good ideas to compete on an equal footing for the trillions of dollars in institutional assets in search of outperformance and all the benefits of true diversification.
