“When you think about where money is being managed, it’s like baseball in 1940,” said Ariel Investments CIO John Rogers, Jr. Thursday to a room full of foundation leaders, consultants, and asset managers.
When it comes to hiring portfolio managers, Rogers argued, many foundations and endowments still need a “Jackie Robinson moment”—a reference to the first African American to play in Major League Baseball when he debuted for the Brooklyn Dodgers in 1947.
“We know they exist, we know they’re out there, and we want to be a part of this.”Rogers was speaking at one of several panels at the Council for Foundations’ 2015 Endowments and Financial Services Summit in New York. Thursday, the first day of the two-day event, included sessions on topics ranging from the future of the economy to governance best practices to impact investing.
But a common thread throughout the day’s events was diversity, which was the topic of two of the day’s six panels, including the one Rogers headlined with three other minority asset managers. Rogers even went as far as to compare the state of the asset management industry to a “modern Jim Crow,” citing racial segregation laws in the US.
Diversity was first brought up in the conference’s opening remarks and Q&A, when an attendee asked John S & James L Knight Foundation CFO Juan Martinez how his foundation grew its number of minority and women portfolio managers.
“I wish I could say there is a magic bullet or magic lever that we pull,” said Martinez. “The reality is we sat with our investment consultants and we said this is something we want to do and here are the criteria… We know they exist, we know they’re out there, and we want to be a part of this.”
Erica Davies, director of external affairs at the Association of Black Foundation Executives, discussed how to solve the lack of diversity in portfolio managers in a panel she moderated featuring the positive example of the Silicon Valley Community Foundation (SVCF).
Some of the largest barriers, she said, are policies and practices that bar diverse candidates from consideration, such as a minimum number of years in the business or level of assets under management. Misperceptions of the riskiness of hiring minority and women managers add to the challenge. Limited access to diverse investing talent manifests through long-term relationships with non-diverse managers and via gate-keeping consultants who don’t make diversity a priority in their manager recommendations.
“We’re trying to make sure our sourcing is inclusive and that any qualified manager can have a crack at the business.”When the SVCF took on the mission of becoming more inclusive in its manager selection, Bert Feuss, senior vice president of investments, said the first thing the foundation did was address diversity goals with its consulting team. The consultants were asked to determine the total number of managers they looked at, how many of those were minority or women, what number of minority and women managers they recommended, and how many minority and women managers were hired.
The results confirmed Feuss’s suspicions: Diversity needed to be prioritized in the manager selection process. From 2013 to 2015, the SVCF increased its number of female and minority managers from three to eight, with assets managed by women and minorities growing from $52 million to $139 million from 2013 to 2014.
“We’re not working toward a specific number or a specific percentage,” Feuss said. “We’re trying to make sure our sourcing is inclusive and that any qualified manager can have a crack at the business.”
Besides discussing diversity goals with consultants, Davies said foundations working to be more inclusive in their own manager selection should develop intentional and explicit diversity policies and connect diversity and inclusion efforts to performance appraisal. Additionally Davies recommended getting to know the diverse talent that’s out there, through minority organizations or conferences.
And why not cast a wider net, asked Thurman White, president and CEO of Progress Investment Management and a board member of the SVCF. “It’s making sure you’re not missing investment opportunities.”
“The talent has always been around,” White said. “What’s lacking is opportunity.”
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Bill Gross now runs the Janus Global Unconstrained Bond fund.