As well as looking at diverse managers, panelists said it's still important to evaluate and meet with non-diverse firms, if only to keep an eye on what they're doing and how they progress.
Ms. Miller-May, for whom legislation dictates she and her investment team must allocate at least 20% of assets to minority-, women- and persons with disability-owned firms, said any manager that comes into the pension fund's boardroom "expects to be asked about their diversity," with executives in turn expecting them "to have a good answer," she said.
CTPF executives want to not only consider diverse managers, "but we want to look at those non-diverse managers and make sure that they have the systems and the processes (in place) that increase diversity because we believe that those diverse candidates that they hire and promote are the next generation of diverse managers," Ms. Miller-May said.
Diverse managers were included in the portfolios of 59% of Cambridge Associates' clients at the end of 2020, which is "exemplary of the fact that we are going out and finding undiscovered, underinvested-in investment ideas" that clients are investing in based on merit.
The top request Ms. Richards saw from Cambridge's clients last year was to send a list of diverse managers with which to meet. "I think that that is necessary, but largely insufficient" in moving the needle.
The barrier is that, as investors and allocators, "there are ways that the metrics and the systems that we have historically used have inherent biases baked into them," Ms. Richards said. "And so, until we address those, just taking different meetings is going to be insufficient."
If an investor meets with managers but is using the same processes with the same biases, they are "going to end up with the same results," Ms. Richards added. Asset allocators asking for a "10-year track record in an industry that has been historically non-diverse" is an example of "baked-in bias." Work needs to be done on evaluation metrics, she added.
Rupal J. Bhansali, New York-based CIO and portfolio manager, international and global equities at Chicago-based Ariel Investments LLC, said the heart of the issue in terms of asking the right questions of diverse managers "is holding people accountable for the right outcomes. … Diversity can end up being tokenism."
If success is defined as taking more meetings with diverse managers, but actually less than 1% of all assets are run by diverse managers, something doesn't add up, Ms. Bhansali said. It doesn't matter how many meetings an investor takes, how many metrics they use to measure diversity and managers, how many questions are asked in a due diligence questionnaire — the important thing is to "ultimately hold (managers) accountable for the outcomes, not the effort."
The inclusion of diverse money managers in an investment portfolio should be viewed as an alpha play, with the potential to boost returns.