Client expectations are shifting the paradigm on diversity, equity, and inclusion (DE&I) across the asset management industry. While plenty of work remains to be done, investment managers and other stakeholders know that ethnic, racial, and gender diversity is fundamental to the success of their firms — and they’re eager to effect real change.
Attendees of Nicsa’s Fearless Leadership Symposium took a deep dive into this topic during a recent session moderated by Kim Hyland, Managing Director and Head of the U.S. Relationship Management Team at MFS Investment Management.
“DE&I is foundational to the work that we do as asset managers and to our ability to sustainably and responsibly create long-term value for our clients,” Hyland said. “Building a diverse workforce and fostering an environment of respectful challenge helps us get the best from our most important, powerful resource: our people.’
Hyland said that clients — the asset owners across the globe — are also committed to DE&I.
“Asset owners are now incorporating DE&I into the selection and monitoring process because it's directly related to financial performance,” she added.
The panel, which also featured Connecticut’s State Treasurer and experts from Verus Investments and the Chicago Teachers’ Pension Fund, explored the composition of the asset manager workforce, strategic action planning, and how to nurture the careers of underrepresented individuals.
CREATING MEASURABLE GOALS
Angela Miller-May, Chief Investment Officer at the Chicago Teachers’ Pension Fund (CTPF), shared her perspective leading a public employee retirement system that services more than 88,000 active and retired teachers.
“As of April 30, CTPF invests $6.2 billion — or 48% of total assets — with firms owned by minorities, women, and persons with disabilities,” Miller-May said. “And 41% of our brokerage commissions are paid to minority, women, and disadvantaged business enterprise (MWDBE) brokerage firms.”
The fund’s DE&I approach is centered on three areas:
- Tracking assets allocated to diverse managers. “We work to maintain and improve on these allocations, which are aligned with the performance and diversification of the portfolio,” Miller-May said.
- Encouraging non-diverse managers to recruit, hire, and promote diverse candidates. “Diverse professionals become the pipeline for diverse managers,” she said.
- Engaging organizations and partners that promote diversity. “We are promoting education and introducing underrepresented people to the investment industry,” Miller-May said. “We think that partnering with organizations and other funds can help further our diversity goals and objectives.”
TURNING PLANS TO ACTION
Shelly Heier, President and Senior Consultant at Verus Investments, shared insight gleaned from her experience with the Verus-founded Institutional Investing Diversity Cooperative (IIDC). Heier launched and currently spearheads the coalition of consulting firms, which works to promote DE&I via data access..
“A driving mantra for me and for my colleagues at Varus, especially through the tough times of 2020, is 'Actions speak louder than words,’” she said. “Whether it's an ESG or DE&I, we are committed to being intentional about what we do — not just greenwashing or rainbow washing with actionless statements, but making sure we're doing things that are meaningful and measurable.”
The IIDC brings together more than two dozen institutional consulting firms representing over $33 trillion in assets.
“We are one voice advocating for access to data in support of our shared belief that having more underrepresented minorities in ownership, leadership, and portfolio management roles in the asset management industry is going to improve the conversation, open opportunities, and benefit the community at large,” Heier said. “But, most importantly, it will impact performance because we believe diversity and diverse teams have better decision-making processes and drive better results.”
FOSTERING ADVANCEMENT OPPORTUNITIES
Fearless Leadership Symposium attendees also heard from Connecticut State Treasurer Shawn T. Wooden, who launched the Coalition for Equity & Opportunity in September 2020. The coalition, representing $26 trillion in assets, aims to confront deeply rooted racial-economic disparities in the United States.
In January, the group announced commitments from multiple members to publicly disclose workforce demographic data — and encouraged others to do the same. Such disclosures allow stakeholders to understand and measure the progress toward diversity initiatives, address racial justice, and foster universal economic prosperity.
Wooden cautioned firms about the dangers of relying purely on in-house promotions as a leadership acquisition strategy.
“Some of the things that might be culturally successful for firms run counter to making progress with DE&I,” he said. “While some firms are very proud of the fact that everyone is homegrown, it’s a very closed process and slower to effectuate change.”
Through his work with the coalition, Wooden said he’s also seen firms take intentional measures to disrupt internal biases.
“There’s this notion that on any open position, you should make sure there's a diverse panel of applicants that are considered,” he said. “It’s not guaranteeing an outcome but structurally putting a support program in place to cast a wider net.”
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the Nicsa panel, they do not necessarily reflect the views of Nicsa or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.