Asset management firms that are owned by women or people of color are at least three times more likely to have diverse investment staffs compared with firms that have non-diverse ownership, according to a study by the John S. and James L. Knight Foundation, in partnership with Global Economics Group, an economics consulting firm.
The study, titled "Knight Diversity of Asset Managers Research Series: Ownership and Teams Diversity Metrics," was released Tuesday and examined data on the diversity of asset management firms' investment staffs, including portfolio managers, analysts and other decision-makers.
The study also found there is more diversity in investment teams, in general, than in ownership. The study considered investment teams as diverse if a minimum of 50% of their portfolio managers were women or people of color. Similarly, an ownership group was considered diverse if women and/or minorities owned at least 50% of the firm's equity ownership.
Knight Foundation noted in a report about the study that this analysis was based on data collected through a survey conducted by eVestment, a Nasdaq platform that provides institutional investment data, Of the 1,096 non-public U.S.-based companies in eVestment's dataset, 204 firms, or 19%, provided data on both ownership diversity and investment team diversity. These responding companies manage an aggregate $3 trillion, or 8%, of the $37.3 trillion in assets overseen by all U.S.-based firms in eVestment's database.
In addition, these 204 firms manage 1,450 public equity, fixed income and hedge fund products and employ a total of 11,300 people, the study said.
Among the 204 respondents, 74% of diverse-owned firms (69 of 93) have diverse investment teams, vs. only 25% (28 of 111) of firms that are not diverse-owned.
Also, within these 204 firms, women remain severely underrepresented — they manage only 23% of the $3 trillion in assets analyzed for the study.
For example, according to the study's data, if a company had zero to 10% diverse ownership, their investment teams would be 24.8% diverse on average. On the other end of the spectrum, if a company had 90% to 100% diverse ownership, then their investment team would be 82.3% diverse on average.
"The higher the ownership diversity, the higher the team diversity, on average, and vice versa," the report said.
The study also found that, on average, non-diverse-owned firms are almost three times larger in asset size than diverse-owned firms ($20.7 billion vs. $8 billion) and this disparity contributes "substantially to the large imbalance between team and ownership representation across the firms in the sample when measured by AUM," according to the report.
Ashley Zohn, vice president of learning and impact at Knight, said in the report: "This study underscores a common theme running through our research on asset managers: We need much more transparency and better reporting to understand the state of firm diversity so that customers can make more informed decisions about who invests their money."
Ms. Zohn added: "In the absence of more comprehensive data about diversity at asset management firms, these results show that ownership diversity is a strong indicator of investment team diversity."
Candice Rosevear, principal at Global Economics Group, said in the report: "We hope this study encourages more asset management firms to share data on the composition of their companies, and that, in turn, this knowledge helps companies realize the talent of underutilized women and minorities."
