U.K. pension funds commit to manager diversity

U.K. pension funds with a collective £125 billion ($174 billion) in assets called on other asset owners Monday to commit to improving diversity among their fund managers.

The call to sign the Asset Owner Diversity Charter came from a working group of large U.K. pension funds that includes the £30 billion Brunel Pension Partnership, Bristol; £17 billion defined contribution multiemployer plan National Employment Savings Trust, London; £32 billion RPMI Railpen, London; £15.7 billion West Midlands Pension Fund, Wolverhampton, England; £8 billion Lothian Pension Fund, Edinburgh, Scotland; and £8.7 billion pension pool London CIV.

Signatories commit to considering fund managers' diversity and inclusion records when choosing new partners, with diversity questions part of overall assessment scores, "meaning fund managers wanting to work with these clients will have to disclose information and demonstrate real devotion on how they are tackling diversity and inclusion within their workforce," the group said in a news release.

Signing the pledge also commits asset owners to include diversity as part of ongoing manager monitoring, with an annual questionnaire to be completed by managers.

The questionnaire asks managers to address diversity and inclusion in five key areas:

• Industry perception.
• Recruitment.
• Culture.
• Promotion.
• Leadership.

The goal is to standardize diversity disclosure and help signatories hold firms accountable for ongoing progress, the release said.

Other signatories with a collective £1.08 trillion in assets include Avon Pension Fund, Barnett-Waddingham, Church of England Pension Board, Coal Pension Trustees Investment, Cornwall Pension Fund, Environment Agency Pension Fund, LCP, LGPS Central Limited, Local Pensions Partnership Investments Ltd, Redington and Willis Towers Watson.

U.K. Minister for Pensions and Financial Inclusion Guy Opperman applauded the charter and encouraged other pension funds to sign. "We need asset managers to be more representative of the savers they represent," he said in the release.

The group is co-chaired by Brunel stewardship manager Helen Price and Lothian portfolio manager David Hickey.

"We expect fund managers to manage diversity as a material investment issue, but we question how well they're doing this if they're doing little to address it in their own organizations," Ms. Price said in the news release. "By asking for this information fund managers will have to confront poor performance and begin taking much needed action on diversity."

Mr. Hickey said that pension funds "are not benefitting from the talent pools available in the population ... We are hoping that the diversity charter will allow us to look under the bonnet of firms' policies and practices and find out what is causing the kinks in the hosepipe, which are particularly extreme with regards to Black talent."