Wilshire’s 2022 Diversity, Equity & Inclusion Report Finds Improvement in Asset Management

The share of clients investing with diverse-owned firms grew from 20% to 39% over the past three years, though AUM of by diverse-owned firms remained lower than non-diverse peers.

The greatest challenge to research on diverse ownership and management in the financial services sector is a lack of data and formalized congruent reporting standards, according to Wilshire Associates’ 2022 Diversity, Equity and Inclusion report.

The lack of data led Wilshire to focus “on analyzing our database of diverse-owned managers and understanding the profile of this population and holdings within our own client base.”

In 2018, Wilshire announced an enhanced initiative to increase awareness among clients and consultants of asset management firms owned by people from underrepresented groups and to create proactive outreach from Wilshire to these managers.

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In response, Wilshire adopted the reporting standards of the Diverse Asset Managers Initiative, an organization dedicated to increasing the use of asset managers from underrepresented groups by institutional investors and to growing those managers’ assets under management.

According to Wilshire’s report, from 2018 to 2021, the proportion of Wilshire clients investing with diverse-owned firms grew from 20% to 39%. Despite this overall net gain, total assets controlled by diverse-owned firms remained low in comparison to their non-diverse owned counterparts.

Industry-wide, firms with women or diverse ownership at a substantial (25-49%) or majority level represented just 8.6% of all firms. While, across all manager searches, the total number awarded to diverse-owned firms doubled from approximately 10% in 2018 to 21% in 2021.

Wilshire reports, “diverse-owned firms represent 10.1% of our manager database and manage 2.0% of our clients’ assets. While our numbers are higher than industry averages, they remain at low levels and reveal that these managers are under-owned relative to their prevalence.”

Wilshire aims to increase inclusion of diverse owned firms, though the report cites various factors that have limited participation. When clients search for asset managers, those searches may be restricted to managers available on a recordkeeper’s platform, potentially leaving diverse-owned firms from properly being identified. It is also possible that some clients set a minimum amount of assets already under management.

The report cites volatility in public markets and valuation as challenges for diverse-owned managers hoping to increase assets under management, due to a low volume of diverse-owned managers in real assets and nontraditional fixed income. However, the report states, “Since 2018, Wilshire’s diverse-owned manager initiative has focused on tracking managers of public markets securities as the data is more readily available in this cohort.”

Looking forward, Wilshire reiterated its ongoing commitment and increasing scope to raise the profile of diverse-owned managers among clients and consultants and to engage proactively with the diverse-owned manager community.