Using diversity data as of Dec. 31, 2021, and net performance data as of Dec. 31, 2022, WTW looked at more than 1,500 strategies across managers. Managers were based around the world. Relative performance was against a manager's self-selected preferred benchmark or the 3-month Sterling Overnight Index Average interest-rate benchmark.
The analysis found that investment teams in the top quartile of gender diversity outperformed the bottom quartile by 45 basis points per year. The top quartile comprised investment teams with the highest proportion of a team reporting as non-male.
By asset class, equity and credit strategies showed a gender diversity premium of 46 basis points and 14 basis points per year, respectively. Regarding real assets, the universe for analysis was smaller than the other asset classes and there were some challenges with sourcing performance net and gross of fees — now a requirement for global data disclosures, said Chris Redmond, head of manager research at WTW, in an email. However, the current data the consultant has "is aligned with the overall trends," Mr. Redmond added.
WTW will, in future, provide additional insights into diversity data through its diversity index, which measures any strategy's diversity vs. where it could be in terms of being broadly represented by all genders and ethnicities. Starting this year, WTW will track the index for the industry, the research paper said.
The index will also allow WTW to monitor the diversity premium at a more granular level over time.
WTW also collated data from 407 money managers on diversity, equity and inclusion, finding that 42% of respondents currently have measurable objectives in their DEI policy. Almost half (49%) have no targeted initiatives to attract more diverse senior talent, the paper said.
However, 40% of managers said they were measuring the gender and ethnicity pay gap, and 38% are measuring the bonus gap — the difference in pay and bonus between men and women at certain levels. Further, 56% of managers are members of industry diversity initiatives.
There was also no meaningful relationship between the size of an organization and greater diversity across ownership or senior leadership, WTW said.
The consultant now wants money managers to expand data collection to other inherent and acquired traits of diversity — beyond gender and ethnicity — to disability, sexual orientation, socioeconomic diversity and neurodiversity.
"There has undoubtedly been progress made on diversity by many asset managers in recent years, but the fact is that the pace of change at an industry level is still slow and disappointing," Mr. Redmond said in a news release accompanying the paper. "We are hopeful that the truly extraordinary investment performance benefits linked to superior diversity can serve as a catalyst for acceleration."
Mr. Redmond said that, while it is crucial to analyze data on an ongoing basis, it is also important to consider a qualitative view on DEI and culture, understanding how each money manager is progressing and how quickly a firm will reach its targets.
Regarding extending the exercise to cover other areas of diversity, Mr. Redmond said in the email that the "primary current limitation is data disclosure." The consultant also supplements a systematic analysis of gender and ethnicity data, where available, with qualitatively driven research of the diversity and culture of a manager, across a range of diversity dimensions, he added.