U.S. asset owners are focusing more on diversity and inclusion within the money managers that run their money and in the portfolio companies in which they're investing.
Pension funds that are working to enhance the diversity of their money manager lineup include the $52.9 billion Teachers' Retirement System of Illinois, Springfield, and the Minnesota State Board of Investment, St. Paul, which manages the $71.1 billion combined fund of the state's public defined benefit plans.
Illinois Teachers has been investing with minority- and women-owned firms through its 15-year-old emerging manager program, which is one of the longest running among U.S. institutional investors and is one of the principal ways the retirement system brings minority- and women-owned business enterprise money managers into the portfolio.
As of June 30, 95% of the $675 million preliminary total of the emerging manager program was managed by 17 minority- and women-owned firms. Across the entire portfolio, 28 minority/women-owned firms, including those in the emerging manager program, managed a preliminary total of $9.5 billion, or 18.6% of total plan assets as of the same date, showed a report about the emerging manager program provided to trustees by Jose Gonzalez, investment officer for the program, during a remote investment committee meeting Aug. 27.
The Minnesota State Board of Investment closed its emerging manager program in the early 2000s after all of the managers graduated to full-sized mandates within the DB plan portfolio, said Mansco Perry III, the board's executive director and CIO, in an interview.
Like the Illinois teachers' fund, MSBI investment staff are considering how best to add more diverse money managers to the combined fund portfolio in response to a recent resolution from the board, Mr. Perry said.
Diverse-owned firms, including minority-owned EARNEST Partners LLC and women-owned Zevenbergen Capital Investments LLC, both graduates of the former emerging managers program, manage a significant portion of assets of the Minnesota portfolio, but the percentage of total assets they manage is not available, Mr. Perry said.