Among the most Influential Women are champions of diverse — and emerging — managers 

A self-described underdog, Sophia Tsai has competed for opportunities in the U.S. as an investment professional who completed her undergraduate education in Hong Kong and later immigrated.

But the managing director for the $6 billion endowment at Trinity Church Wall Street said this gives her the ability to “recognize other underdogs” striving for success and trying to stand out among the crowd, including diverse and emerging talent.

Advocates for diverse managers — as well as those considered “emerging” — are working at some of the largest allocators, investment managers and consulting firms. And among these advocates are female investment professionals who, like Tsai, have been named to Pensions & Investments’ Influential Women in Institutional Investing program. Some honorees noted their work to support diverse managers as one of their most cherished achievements.

The number of women- and minority-owned firms has grown by at least 20% annually over the past five years, according to a report by Fairview Capital Partners based on data through Dec. 31. The $10.8 billion manager was co-founded in 1994 by managing partner and 2023 Influential Women honoree JoAnn Price.

But a 2021 study from the John S. and James L. Knight Foundation found that only 1.4% of capital within the $82 trillion asset management industry is managed by diverse groups.

“Keep that 1.4% number in mind because even for people who’ve been in the industry for a long period of time, including me, it’s a stunning underrepresentation — and an opportunity,” said Marcia Page, who has worked in the industry since the mid-1980s and has been named to the 2024 Influential Women class.

A co-founder of Värde Partners in 1993, Page said she has “been very happy to be under the radar for most of my career.” But “in the interest of moving more capital more equitably to women and other represented talent,” she has started to put herself “out there more.”

While transitioning from the dual role of co-CEO and co-chief investment officer to executive chair at the $13 billion alternatives manager in 2016, Page gained “an appreciation for how little capital was being managed institutionally” by U.S.-based diverse talent. What resulted was the 2021 founding of MPowered Capital, where Page is also CEO. The firm, which invests in diverse alternatives managers, closed its first fund last year with $110 million.

“There is a benefit to being out there and having a stronger voice — using credibility, integrity and staying power for the benefit of influencing what the next generation of talent looks like,” Page added. “I could have happily stayed back, but I’ve pushed myself to be a bigger voice in the industry.”

Diverse and emerging

In discussions about diverse managers, the term “emerging” may also come up. Emerging managers are “small managers who are super hungry” for capital, and more than 80% of diverse managers are identified as such, Trinity’s Tsai said.

Over the past 20 years, there’s been “a huge evolution” in the emerging manager space, and that focus “also includes women (and) diversity as a component of that,” said Mina Pacheco Nazemi, who was honored in the 2023 Influential Women class. She serves as head of the diversified alternative equity team at the $409 billion investment manager Barings, which defines emerging managers as firms in at most their third round of fundraising.

“Diverse managers often have not had the opportunity to manage assets because of historical challenges or biases,” she added. “That is why you see a lot of programs having an emerging or diverse manager component.”

Emerging manager programs have been started to support the launch of new firms. Some states including Illinois and New York have enacted emerging manager-related laws requiring that public pension plans include diversity mandates. State laws and programs meant to support emerging managers may also specify how much capital a firm must have to qualify, with some programs even specifying the threshold based on asset class. Illinois has a maximum of $10 billion, and a minimum of $100 million.

In 2024, diverse-owned firms in the private markets have been targeting a median fund size of $100 million, according to data from Fairview Capital through June 30. The figure for these firms lags against the broader industry, where the median target fund size is $418 million.

While investors may come up with their own definition, there is no universal definition for an emerging manager. But organizations like Venture Forward may try to find and use a “general sweet spot combination of fund sizes and series to categorize fund managers that overlap in their experiences, challenges faced and opportunities they address,” Executive Director Maryam Haque said. The nonprofit’s educational programs and workshops for emerging venture capital managers consider firms that are at most in their fourth round fundraising and have a fund size no more than $100 million.

For emerging managers, Tsai said that “the only way they can survive is to deliver a very differentiated strategy” or offer something unique that allocators are willing to deploy capital to.

At Xponance, an “emerging” firm is defined as “entrepreneurial in spirit in the way it’s being run,” said Cesar Gonzales, client portfolio manager and director of manager development. The $19 billion women-owned multistrategy manager was founded by CEO, CIO and 2023 Influential Women honoree Tina Byles Williams.

Women entrepreneurs in particular tend to help each other more than their male counterparts, Gonzales said, given that they “have a different kind of upbringing (and) different challenges.” For instance, when Byles Williams started the firm in 1996, she took a second mortgage on her home.

New firms may receive their first dollar through platforms like Xponance and Daraja Capital, which also was founded by a woman. CEO and 2023 Influential Women honoree Raudline Etienne launched Daraja to address “a challenge for people of color and women to be in those networks of wealth, and to have friends and family who can write them six-digit checks and help them launch,” noting that “talent is observable at the early stage.”

Page invested $75 million of her own capital to launch MPowered Capital. But the firm wouldn’t be what it is today without Chrissie Chen Pariso, who said “I’m in” when Page only had a “one-page idea of what MPowered Capital would look like” and now serves as managing director. This was before the idea of developing a firm, creating a fund and coming up with a name, so to have a “remarkable partner in this journey” with everyone who’s come along since, “it’s incredible,” Page said.

Persisting challenges

Some allocators may require managers to have a minimum three-year or five-year track record,” which for their portfolio “means it will be difficult to include or recommend any diverse or emerging managers,” Tsai said. Although these firms may not have a long track record to underwrite, she noted that “if you know how to underwrite emerging managers, they can actually outperform established managers.”

Emerging managers still face some stigma, so they have trouble “getting a meeting,” Pacheco Nazemi said. Allocators may have “felt like it was too risky, but I think it’s taken these two decades to really get comfortable — and frankly, because they realized they missed out on really strong performance,” she added. Another challenge, particularly around the diversity side or women side, is “there’s just been a lot of bias around that” since these managers “don’t look the part,” she noted.

Ideally, emerging firms graduate from platforms to limited partners’ larger portfolio. But if there’s no allocation for a particular asset class or style of investing within it for the manager, “there’s really nothing they can do,” Gonzales said, which is why Xponance encourages new firms to start strategies around what the larger portfolio is seeking.

Public plans invest in emerging and diverse managers since “there’s a focus on racial and gender equity within their portfolios” and “making sure that their portfolios are a reflection of the demographics of their state,” Barings’ Pacheco Nazemi.

This year’s Influential Women honorees who support diverse and emerging managers in the public pension space include Taffi Ayodele, who — as director of DEI and emerging manager strategy for the bureau of asset management for the New York City comptroller’s office — works with these managers at the $274.4 billion New York City Retirement Systems. On her road to becoming senior investment director of sustainable and impact investing research at Cambridge Associates, Chavon Sutton held and inaugurated the role currently held by Ayodele.

Within the asset manager space, Gennell Jefferson has contributed, too. On her road to becoming partner in investor relations at the $12.9 billion Vistria Group, she led GE Asset Management’s diverse and emerging manager program and deployed more than $1 billion in capital to diverse firms.

“It’s not an understatement to say that the work that Gennell has done during the tenure of her career has pushed diversity forward,” said DeAnna Ingram Jones, consultant at NEPC and president of the Chicago chapter of the National Association of Securities Professionals, of which Jefferson is a member.

“Diverse professionals owe her a debt of gratitude for all that she has done to welcome and support diverse talent in financial services,” Ingram Jones added.

Some endowments and foundations emphasize diversity goals in the hiring of investment consultants and asset managers.

For members of Trinity’s investment committee, their mission is to deploy capital to fund the church’s mission in housing, homelessness and racial justice. The endowment doesn’t have a specific ESG or DEI target, but the capital in the private equity portfolio that Tsai helped to build in 2018 has more than a third of it allocated to managers with 50% diverse ownership.

The portfolio is “still rather young,” Tsai said, when “compared to the benchmark from many angles, but it has achieved top-tier returns” through both portfolio construction and manager selection. Over $800 million in capital has been deployed from the portfolio, with the J-curve effect alleviated through co-investments and secondary purchases.

Small but connected universe

Some of this year’s Influential Women participate in programs connecting diverse managers with allocators.

Lauren Mathias said she’s been proud of the contributions she and her fellow research specialists “have been able to provide the diverse and emerging manager community” through the Callan Connects program. She serves as senior vice president of global manager research and diversity, equity and belonging champion at the $4 trillion investment consultant.

Started in 2010, Callan Connects works to “identify, research proactively and ultimately recommend diverse and emerging managers” for clients, Mathias said. Responsible for organizing the program’s quarterly meetings, she noted that she’s “gained a lot of understanding of what it’s like to be an entrepreneur and how hard it is.”

“Being proactive as a large institutional consulting firm takes the weight off some of these organizations just starting, and you can provide them some advice and help them,” she added.

Venus Phillips, managing director of the $4 billion Kresge Foundation, is a founding member of the Black Limited Partners Association. Formed during the COVID-19 pandemic, the group’s mission includes “investing in diverse and emerging managers, as well as helping to build the pipeline for diverse individuals in the industry,” she said.

Saint Paul & Minnesota Foundation CIO Shannon O’Leary works in and makes commitments in this small world. The $1.8 billion endowment is a member of Institutional Allocators for Diversity, Equity, & Inclusion, a consortium that was co-founded by Tsai.

Founded following George Floyd’s death in 2020, IADEI’s mission is to help connect investors with diverse managers, of which it maintains a database of more than 1,300. The organization holds bimonthly virtual meetings, in which between 80 and 100 allocators on average listen to pitches from six firms.

But the effort to advance diverse and emerging managers is “a hard business,” Mathias noted. “In many situations, it works out. In others, it doesn’t.” Still, for her, “being part of something over 14 years has allowed these organizations to be heard and hopefully succeed,” and she’s proud to have done this and not alone.