Updated with correction
The global spotlight on racial and gender inequality has spurred new interest among institutional owners in investing more of their assets with money managers with diverse ownership and workforces.
Recent incidents of racial injustice and long-standing inequalities in the U.S., ongoing protests and calls for change have trained the spotlight on institutional investors and the diversity of the investment managers they hire to manage their portfolios.
The current environment has spurred some asset owners to explore earmarking a portion of their assets for investment with money managers with diverse ownership, but sources said a surge in searches and hires has yet to manifest.
"Hiring diverse managers is the right thing to do. It increases the diversity of thought and of experience, which theoretically means you can better assess investment opportunities and potentially produce higher returns," said Tracy V. Maitland, president and chief investment officer of specialist fixed-income manager Advent Capital Management LLC, New York, which is minority-owned.
"Asset owners and consultants need to adopt a diversity policy that is consistent and constant," Mr. Maitland said, adding that "diverse managers need to be on equal ground with firms with traditional ownership."
Observers pointed to the existing emerging and minority manager programs of large asset owners for evidence of the efficacy of the approach, including the $148.1 billion Teacher Retirement System of Texas, Austin, the $51.2 billion Teachers' Retirement System of the State of Illinois, Springfield, and the $44.7 billion Illinois Municipal Retirement Fund, Oak Brook.
Some plan sponsors with long-standing emerging and/or diverse manager programs are working to increase their overall allocation to diverse managers and to broaden their programs to invest more in private market asset classes with more diverse-owned firms, plan officials said in interviews with Pensions & Investments.
For example, Shawn T. Wooden, state treasurer of Connecticut and the principal fiduciary of the $37 billion Connecticut Retirement Plans and Trust Funds, Hartford, will make changes later this year to the fund's emerging managers program that will increase the target allocation to the program to 8% of total fund assets, from a range of 2% to 5% now.
Currently, diverse-owned firms manage 14.6% across all asset classes of Connecticut's portfolio. Of that percentage, minority-owned firms in the emerging manager program oversee 2.9% of total assets.
"When I came into office in January 2019, I reviewed everything about the emerging manager program, which was launched in 2005. Despite its maturity and success in enhancing the returns of the fund and the opportunities it afforded to minority and smaller managers, I believe we can do more," Mr. Wooden said during an interview.