Research

The events of 2020 have impacted how institutional investors think about diversity (gender, race, LGBTQ, etc.) in their investment portfolios. Against this backdrop, Aon conducted a survey of institutional investors that revealed increased pressure from boards and beneficiaries to address diversity in their portfolio. This report examines the potential challenges associated with diverse investing initiatives, as well as the reasons why investors pursue diverse investing initiatives, current trends in institutional investor diversity policies/programs, potential components of diverse investment programs, how diversity is defined and the pros and cons of those definitions, and more.

The Knight Foundation and Global Economics Group recently published “Diversity of Asset Managers in Philanthropy,” a study that assesses the representation of diverse asset managers among 26 of the top 50 foundations in the US. Among the report’s findings are that $8.62 billion (13.5%) of the $63.95 billion in endowment investments overseen by these foundations are invested with diversely-owned firms (women- and racially or ethnically diverse-owned investment firms). The report also found that the average foundation invests 13.3% of its assets in diversely-owned firms, 10.8% in women-owned firms and 9% in minority-owned firms. The median foundationinvests 13.5% in diversely-owned firms, 10.9% in women-owned firms and 7.9% in minority-owned firms.

Research across a multitude of fields and industries has identified the potential economic and social benefits of diversity. Yet the asset management industry continues to struggle with a lack of diversity. Research studies and articles have consistently documented the low level of representation by women and racial/ethnic minorities among asset managers. Analyzing and exploring diversity in the asset management industry is vital given its sheer enormity and the wealth it generates ($69.1 trillion in assets under management and $99 billion in profits in 2016).

The Diverse Asset Managers Initiative (DAMI) recently released its Second Annual Investment Consultant Survey. The survey provides great insight into the underrepresentation of women and racial or ethnic minorities at some of the largest investment management consulting firms in the United States and how it contributes to an extremely low engagement of diverse asset managers by many retirement plans. 

Some of the practical, performance- and risk-related questions surrounding women and diverse-managed hedge funds are addressed in this report. In doing so, the authors constructed a women and minority owned hedge fund index, as well as surveyed and interviewed more than 25 managers and investors.

In this report, the Knight Foundation along with Professor Josh Lerner (Harvard Business School) and Bella Private Markets update our previous study using revised data and enhanced methodology. The most significant change being the availability of new ownership diversity data on PE and real estate funds, allowing us to study real estate performance for the first time.

This report analyzes how racial bias affects capital allocators’ decision-making when evaluating asset managers. Surveys were conducted to test whether capital allocators had biases that impacted their evaluations of firms led by people of color, and if so, how these biases manifest. The results suggest that funds led by people of color may face the most barriers to advancement.

“Why don’t we have more investment manager diversity?” That simple question from the CEO of a long-standing client served as a catalyst for a change in perspective for Colonial Consulting. Differentiated Talent chronicles that defining moment, how it challenged the firm to re-think its business practices and following that period of self-analysis, to enact change for the better.

Larry Manson, Jim Casselberry and David Kushner of NexTier examine the current state of institutional searches for emerging asset managers and prescribe best practices for identifying and utilizing the most talented emerging managers.