Robin Diamonte, chief investment officer at Raytheon Technologies, expects to soon launch a diverse manager program, pressuring the fund’s asset managers to hire more minorities and those from other underrepresented groups.
The investment team will start seeking and interviewing diverse managers for all of its new mandate searches, according to the investment chief. The fund will evaluate managers based on four diversity, equity, and inclusion criteria.
“I’m not doing this because it’s a social justice issue,” Diamonte told CIO. “I’m doing it because it’s the right thing to do. And I think that our returns, our alpha, and ultimately our performance are going to improve if we add diversity into our program.”
Asset managers will be evaluated based on whether they are owned by a majority (more than 50%) number of diverse individuals; owned by a substantial number of diverse individuals (more than 25%, but less than 51%); have assets managed by diverse members; or have strong diversity and inclusion (D&I) policies embedded into the company policies.
The corporate fund will send out a survey later this month to assess which of its portfolio managers are diverse, based on race, ethnicity, and gender, as well as sexual orientation, veteran status, and disabilities.
Investment firms will be scored on their progress integrating greater diversity and inclusion on their investment teams, the allocator said, and whether they currently have plans such as pay equity programs in place.
The diverse manager program is launching amid broader changes at Raytheon. In January, the aerospace and defense company hired a chief diversity officer, Marie R. Sylla-Dixon, who will shape the future of talent management at the company.
Other institutional investors are pressuring asset managers to build inclusive teams. In October, David Swensen, the investment chief at Yale University’s $31.2 billion endowment, told money managers in a memo that he will start tracking their progress on hiring women and minorities.
The same month, a group of 31 Canadian allocators, including the Alberta Investment Management Corporation (AIMCo), and Caisse de dépôt et placement du Québec (CDPQ), also pledged to integrate diversity into their investment practices.
It’s part of a broader push among allocators after the deaths of George Floyd, Breonna Taylor, and others caused investors to reflect and to look over their own investment portfolios. Several allocators wrote opinion pieces in CIO Magazine recommending best practices to incorporate diversity into their investment practices.
Diamonte says she has considered incorporating a diverse manager program for some time. But she was wary that the corporate plan may run afoul of Employee Retirement Income Security Act (ERISA) guidelines that may deem diversity criteria a conflict of interest with the plan’s fiduciary duty. The investment chief decided to go ahead after consulting the fund’s ERISA lawyers.
“Because of ERISA, we need to make sure that we don’t lower our criteria on why we’re hiring a manager, and we want them to have the best performance for all participants,” she said. “But, at the same time, that doesn’t mean that we can’t look harder for those good diverse managers.”
Despite what is likely to be additional due diligence and work, Diamonte says the initiative was welcomed and supported by the members of her investment team.
“Every institution needs to hold itself accountable for diversity, equity, and inclusion, and we need to hold our vendors and our supply chain and the people that we do business with accountable,” Diamonte said. “If we don’t do that, nothing’s ever going to change.”
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