Although the institutional investing industry is paying increased attention to diverse money managers, and some consultants and asset owners are allocating to them, concerns remain for the future of these firms and initiatives in place to promote them.
A major concern is that of dilution, said Gilbert A. Garcia, Houston-based managing partner at Garcia Hamilton & Associates LP.
"I'm concerned that, as there's now a desire to start opening up opportunity for minority money managers, that you're going to see more and more people start lowering the threshold of" how such firms are defined, with ownership levels as low as 25%, Mr. Garcia said. He said it's the kind of situation seen in construction and other supplier industries — "white male-dominated firms having a very small token minority ownership" and qualifying as a diverse manager.
Short-termism was another concern for participants in Pensions & Investments' second diversity virtual roundtable, which took place June 22.
"What I worry about is, what will our reflections be five years, 10 years from now?" said Jasmine N. Richards, Boston-based head of diverse manager research at Cambridge Associates LLC. There's an immediacy in terms of acting on adding diverse managers, but "we want to be putting the right steps in place, so that five years, 10 years from now we don't have a set of asset owners that … shot from the hip, made some investments" and Cambridge executives pat themselves on the back and feel good in the near term, she said.
Ms. Richards wants to make sure executives did enough research, made appropriate investments and understood the investment case, ensuring Cambridge is "making the right investments and that we can still support those managers five years, 10 years from now." She also wants to make sure asset owners don't just follow consultants' recommendations in the near term, but have a long-term plan.
"So we want to make sure that we have that balance between the near-term goals and results and really understand the long-term picture because I think we're all agreed that we don't want this to be just a moment. We want to make sure we have lasting impact," Ms. Richards said.
Angela Miller-May, CIO at the $13 billion Public School Teachers' Pension & Retirement Fund of Chicago, is also worried about intentions translating into action. "This last year, when we've seen so many managers with so many initiatives — and some have been really successful and great initiatives … but I'm concerned overall that the initiatives won't turn into action," Ms. Miller-May said. "We've been promised quite a few things over the last year as far as increasing diversity, putting in programs, being committed to colleges and diverse managers, but now we're taking a step back and we're going back to those managers, back to those organizations, and saying 'where is the action?'" she said.
Executives are asking how promises made are coming to fruition, with more diversity promised across organizations in terms of hiring, for example. "We're in this period of time where there has been a lot of talk. And now we want to make sure that that talk turns into action," Ms. Miller-May said.
That sentiment was echoed by Rupal J. Bhansali, New York-based CIO and portfolio manager, international and global equities at Ariel Investments LLC, who said she is worried that diversity efforts could translate into tokenism "where people just check the box of having taken certain steps at a headline level, but actually not affecting the outcomes and the opportunity set for actual assets being managed by diverse managers."
She wants managers to be held accountable for the end results that executives want to see — more diversity — "not for the rhetoric that we hear being sprouted," Ms. Bhansali said.
