ResearchMay 22, 2019

Diversity Not a Priority for Asset Managers

Report finds that interest and concern have not translated into action.

Reported by Michael Katz

Despite increasing demands by investors for more diversity among asset managers, progress in these firms has been slow, according to a report from investment management and consulting firm Wilshire Associates.

A survey by Wilshire asked more than 500 asset managers whether they believe having diverse and inclusive teams is important and, if so, how they approach diversity in their hiring and talent retention programs. The report’s key finding was that diversity is not a priority for many asset managers.

The report cited statistics showing that fewer than 200 of 7,000 mutual funds are run by women, and that women accounted for just over 10% of investment partner or equivalent roles. Additionally, it said people of color make up 22% of the venture capital workforce, with African American employees and Hispanic or Latino employees at just 3% and 4%, respectively.

According to the survey, many managers are “beginning to wake up to the lack of diversity in their firms” as almost 60% of those polled who are running public markets strategies said their firm places a high importance on diversity. However, the results also indicate that interest and concern have not translated into action.

The data also revealed that approximately 25% of firms running private market strategies are not prioritizing diversity, and rated its importance a 3 out of 5 or less.

“Some firms responding to our survey said they have been successful in building diverse teams organically, without prioritizing diversity,” said the report. “In other words, diversity is not an intentional outcome of their hiring practices or talent retention programs.”

And other managers said that while they felt diversity was important, it was not a priority because the firm was formed as a small team that was not expected to grow, or the team has low turnover or long-tenured employees.

“The results beg important questions: How should we view these responses? Are they just well-articulated excuses or are they genuine barriers to diversity which require careful reflection when we are engaging with managers on this topic?” said the report. “On the one hand, we view long-tenured portfolio managers as a strength … on the other hand, low investment staff turnover also limits the opportunity to improve diversity if it is missing.”

When asked to rank the benefits they hope to gain from building diverse investment teams, respondents said firms that are prioritizing diversity are doing so based on improving the quality of investment decisions.

“Achieving strong returns requires having a broad spectrum of unique company and industry insights,” said one firm in response to the survey. “Such insights can only be generated by a diverse team of analysts who not only possess strong research skills and the ability to think independently and creatively, but also bring unique perspectives to their analysis of businesses.”