The number of women- and minority-owned firms in asset management makes up a low percentage of all firms in the industry — and represents an even smaller fraction of the total assets under management within the industry across all asset classes, results of a new study showed.
The study conducted by Bella Research Group and released by the John S. and James L. Knight Foundation, which examines diverse ownership in the asset management industry, showed that across four asset classes examined — hedge funds, mutual funds, private equity funds and real estate funds — firms owned by minorities and women represent just 1.1% of $67.1 trillion in assets under management as of June 30.
Broken down, women- and minority-owned mutual funds represent 5.2% and 3.8%, respectively, of all mutual funds. The level of diverse ownership is even lower when measured by assets: Women-owned mutual funds manage 0.9% of the total industry AUM, and minority-owned mutual funds manage only 0.3%.
For hedge funds, ownership is about 3.3% and 5.5%, respectively, for the two groups. Women- and minority-owned hedge funds control less than 1% of the total industry assets.
Among all active private equity funds established since 2004, 2.1% of funds are managed by women-owned firms and 3.8% of funds are managed by minority-owned firms. Together, women- and minority-owned firms represent less than 5% of AUM in the private equity industry.
Finally, the study identified 11 women-owned funds and 64 minority-owned funds in real estate. Together, they represent less than 3% of all real estate funds. Representation by AUM is even lower, with women and minorities representing about 0.3% and 1.5%, respectively, of the industry totals.
The study also showed there is no statistical difference in performance between diverse-owned firms across asset classes. In fact, some of the women- and minority-owned managers are among the higher performers.
"We asked (Bella Research) to look at performance,” said Juan J. Martinez, vice president, chief financial officer and treasurer of the Knight Foundation. “They found the universe of minority- and women-owned managers behaves like the regular world. Performance was the key hurdle. The study points to that not being true.”
The Knight Foundation’s decision to support this research stemmed from its effort to increase the diversity of asset managers in its own endowment investments: The foundation went from investing a mere $7 million with diverse-owned firms in 2010 to $472 million in 2016, representing 22.5% of total endowment holdings.
“As investors, we use a set of traditional criteria to mitigate risk,” Mr. Martinez said. “That criteria can be determinantal to newer firms, to minority-owned firms that may not have had a long stand-alone track record, and to managers that may not have the friends and family networks necessary to generate seed capital.”
Mr. Martinez added: “This can lead to investment decisions that create excuses for not investing in minority- and women-owned managers.”
The full report is available on Bella Research’s website.