Asset owners are increasing the pressure on their money managers to diversify their workforces, with some inquiring into the makeup of senior management as part of their due diligence.
That's the latest step in a persistent drive to institute change in an industry still dominated by white males.
Investors are keen to invest with managers with diverse workforces because they can provide a broader range of investment ideas. Studies have shown that diverse investment managers returns are similar, debunking the myth that women- and minority-owned money managers underperformed their peers. A 2019 study of the John S. and James L. Knight Foundation by Bella Private Markets and Harvard Business School professor Josh Lerner showed that for most asset classes, the returns of diverse-owned firms are not significantly different than non-diverse firms.
A 2019 survey by the University of California board of regents' office of the chief investment officer showed that 35 of its 98 managers that responded to its survey were substantially or majority diverse-owned or women-owned firms. Substantially or majority diverse- or woman-owned investment partners managed 19.6% of survey respondents' $89 billion in combined assets under management.
"While we have more work to do, we have made significant progress in advancing diversity in our workforce and among our investment partners," the UC office said in the report. To increase the UC's access to top-performing firms owned by women, African Americans and Latinos, the investment office created a program called "Diversified Returns," which they expected to implement in 2020. Officials in the UC's office of the CIO also asks money managers about their diversity and inclusion policies, programs and metrics, and developed baseline data regarding its managers' demographics.
Officials at the UC office of the chief investment officer declined to be interviewed.