Bill to boost asset management diversity introduced

A bill aimed at increasing diversity in the asset management industry was introduced in the House and Senate Wednesday.

The Too Narrow to Succeed Act would direct the Department of Labor to conduct a survey of best practices in asset management for increasing diversity, and require federally controlled trusts and retirement plans that utilize externally managed funds to release annual reports on the use of diverse-owned asset management firms.

The bill, which was introduced by Sen. Tim Kaine, D-Va., Sen. Cory Booker, D-N.J., and Rep. Joyce Beatty, D-Ohio, would also compel the Labor Department's ERISA Advisory Council to consider the barriers in place for private-sector retirement plans utilizing diverse asset management firms and methods to overcome such barriers.

"If you have too narrow a perspective, you endanger the financial success of your clients," Mr. Kaine said in a news release. "This commonsense legislation will help ensure a safer financial future for workers and their families."

A 2021 report from the $2.9 billion John S. and James L. Knight Foundation, Miami, showed that just 1.4% of the $82.24 trillion of U.S. assets under management in the foundation's sample was run by diverse-owned firms as of September 2021.

"This gap is unacceptable and is not only a disservice to the fund managers, but to all the American workers and retirees whose savings would benefit from their expertise," Mr. Booker said in the news release. "This bicameral legislation will increase opportunities for women and minority-led firms to manage the retirement funds of American workers."

Ms. Beatty, chairwoman of the House Financial Services Subcommittee on Diversity and Inclusion, said in the news release that the bill will "shine a light on this diversity desert and expand opportunities" for minority- and women-owned asset management firms.

Her subcommittee held a hearing in December in which representatives from BlackRock and State Street Global Advisors testified about their diversity practices.

The Diverse Asset Managers Initiative, a consortium of financial services professionals, institutional investors, corporate and philanthropic board members, and trade associations that aims to boost the number of diverse-owned asset management firms and increase their assets under management, supports the bill.

"This is crucial legislation for the asset management industry — and Americans everywhere," said Robert Raben, executive director and founder of the Diverse Asset Managers Initiative, in a statement. "For too long, the industry has been predominantly white and male —locking people of color and women out of a powerful financial sector."

A growing number of asset owners are increasing investment with traditional and alternative money managers that have diverse ownership and workforces.