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Best places to work in money management

Workplace diversity pays dividends that are priceless

Senior executives of T. Rowe Price Associates were front and center, leading a session on investment management for prospective Toigo Fellow candidates.

Different perspectives give employees the chance to learn new and better ways

Building and retaining a diverse workplace is a priority for a number of winners in the 2017 Best Places to Work in Money Management program.

Such efforts are increasingly important, top executives said, because different perspectives, backgrounds and experiences can help solve complex problems — and those same efforts can create an open and supportive workplace where employees can do their best work.

When "different people from different backgrounds and norms come to the table with different information (you're) going to end up with better insight, maybe poke more holes in an area," said Thalia B. Lankin, chief business development officer at the AFL-CIO Housing Investment Trust in Washington. The trust is a newcomer to Pensions & Investments' BPTW program, earning a spot this year among midsize employers.

Gilbert A. Garcia, a managing partner at Garcia Hamilton & Associates LP of Houston, said building diverse money management firms starts with a philosophy at the top that "it's important and beneficial to the company."

"When you start looking at candidates and talking to universities and groups and have that philosophy, they feed off that and know you're sincere," Mr. Garcia said.

"If you're doing it just to check a box, (you're) defeating the entire purpose."

To help build a pipeline of diverse candidates, Mr. Garcia said he and other officials at the firm, in which women and minorities own a combined 91%, speak to college students, including campus minority groups, about opportunities in the money management industry and lessons they learned along the way. This year marks Garcia Hamilton's second consecutive appearance on the annual BPTW list as a small employer.

Almost always, these conversations take place in a classroom or assembly setting, Mr. Garcia said. Very rarely is it a job fair. "The purpose is less about ​a job and more about serving as a role model," he said.

Women- and minority-owned firms in asset management make up a low percentage of all firms in the industry, ranging between 3% and 9% depending on the asset class in which they specialize: mutual funds, private equity funds, hedge funds or real estate funds, according to a study conducted by Bella Research Group and released by the John S. and James L. Knight Foundation in May. What's more, they represent an even smaller fraction of the total assets under management — about 1% — within the industry.

Priming the pump

Tom Kazmierczak Jr., head of diversity and inclusion at T. Rowe Price Associates (TROW) Inc. (TROW), agreed that moving the needle on diversity starts with building a pipeline of diverse, emerging talent.

Working with the Robert Toigo Foundation, which aims to promote diversity in the financial services industry, the firm invites diverse MBA students with an interest in asset management to T. Rowe Price's Baltimore office for three days each year to meet with the investment team and its CEO. Candidates include ethnic minorities, veterans, LGBT students and women.

In addition to the MBA weekend, T. Rowe Price adopted a policy in 2015 that at least 30% of job candidates for open, senior-level roles had to be female or minority candidates. In 2016, 46% of open, senior-level roles were filled by women or minorities, Mr. Kazmierczak said.

Efforts to recruit a diverse workforce at Ariel Investments LLC are helped by the fact that diverse candidates seek out the firm, said President Mellody Hobson. If a firm is already seen as diverse, diverse candidates will seek it out, she said.

Women make up 50% of the Chicago-based firm, which notched its first appearance on the BPTW list this year, and 45% of the executive team. Minorities make up 48% of the total firm.

Chad Astmann, co-head, global sector leader, asset management and alternative investments, at executive search and recruiting firm Korn Ferry, said a lot of the firm's executive recruiting for money management firms spans into "other industries that are already pretty diverse."

In a search for a chief marketing officer, for instance, the New York-based firm might look at consumer organizations, an area that tends to be more diverse than financial services, he said.

Building relationships with organizations that support diversity, such as networks for women or minorities, also have been helpful in recruitment, Mr. Astmann said.

Michael S. Falk, partner at money management consultant Focus Consulting Group in Long Grove, Ill., noted, and Mr. Astmann agreed, that diversity goes beyond gender and ethnicity and includes other factors such as age, education level, education focus and thinking styles.

Models for success

While it's important to recruit a diverse workforce, it's even "more important to mentor (employees) and give them a pathway to success and management, which is why you see so many women and minorities in senior management roles and partner roles" at Garcia Hamilton, Mr. Garcia said, adding that internal mentoring at the firm happens informally.

When you have women in partner and portfolio manager positions, for instance, "younger women in the firm tend to gravitate to them for internal guidance/mentoring," Mr. Garcia said.

Of the firm's 30 employees, 20 are women and 18 are minorities. Of the 12 members of its management team, eight are women and six are minorities. On the 10-member investment team, four are women and five are minorities.

At the AFL-CIO Housing Investment Trust, the percentage of women across the firm and the percentage of women on the executive team are nearly identical — 56% and 54%, respectively, officials said.

"I think that helps a lot when senior management is somewhat representative of (the) full staff," said Erica Khatchadourian, the trust's chief financial officer. "Someone can always identify with somebody."

At T. Rowe Price, notching its second win as a BPTW employer among super-sized firms, employees can join business resource groups focused on engaging female, minority and LGBT employees, Mr. Kazmierczak said.

Employees do not have to identify with the one of the groups to join.

Today, those business resource groups have just less than 2,500 members combined, up from less than 1,000 members three years ago, he said. Recent activities include a year-long mentorship program that matches senior female leaders at the firm with emerging female leaders, Mr. Kazmierczak said.

While industry sources agreed the level of diversity at asset management firms appears to be improving, the pace is slow.

Korn Ferry's Mr. Astmann said that part of the explanation is generational.

"The baby-boomer generation that is and was leading the industry is starting to phase out. There wasn't a lot of gender diversity or ethnic diversity in that population" in asset management, Mr. Astmann said.

Within the Generation X population, there are more women and minorities who are "starting to take over and lead these organizations," Mr. Astmann said. He noted positions just below that of the CEO — such as CFO or chief marketing officer — are seeing more diversity than the CEO role.

"Today, I think largely there (has) not been as much effort in creating strong benches of diverse potential CEOs within an organization," Mr. Astmann said. "That is changing rapidly, though. When we do succession work, far more often today there is at least one woman on that succession plan" as opposed to 10 years ago, Mr. Astmann said.

'Takes time and effort'

Although 32% of T. Rowe Price's senior-level hires in 2016 were women, 83% of the executive staff is male, company statistics show.

"It takes time and effort to move the needle, especially in a firm that has such lengthy tenure," Mr. Kazmierczak said.

Mr. Garcia said he believes investors are driving and will continue to drive part of the move toward more diverse money management firms.

"It behooves (asset owners and consultants) in this day and age (where) performance and returns are so difficult (to) go the extra mile to source good managers and good quality people," he said.

One investor that subscribes to that way of thinking is the Miami-based John S. and James L. Knight Foundation, which has more than 20% of its $2.2 billion portfolio invested with women- and/or minority-owned managers.

"The more complex a system is or problem is, the more dollar and sense benefit it is to have more people with diverse backgrounds looking at the problem," said Juan J. Martinez, vice president, chief financial officer and treasurer of the foundation.

The Bella Research Group study released by the foundation in May found that across the four asset classes examined, firms owned by minorities and women represented just 1.1% of $67.1 trillion in assets under management as of June 30, 2016.

Regarding performance, the group found there was no statistical difference in performance between diverse-owned firms across asset classes. In fact, some of the women- and minority-owned managers were among the higher performers.