Diverse Asset Managers: Opportunities for inclusion
Research shows firms owned by women and minorities manage just 1.3 percent of assets in the $69 trillion asset management industry, though their performance is not statistically different from the industry as a whole, Knight Foundation’s chief financial officer Juan Martinez told the U.S. House Finance Committee’s Subcommittee on Diversity and Inclusion.
In fact, a Knight-funded study by Harvard Business School professor Josh Lerner’s Bella Research found that women- and minority-owned funds were overrepresented among the 25% of performers in their asset classes, suggesting that investors are leaving opportunities on the table, Martinez said in his testimony on June 25, 2019.
Knight Foundation has put 34% of its endowment, or $749 million, under management by 14 women- or minority-owned firms since 2010, Martinez said during the hearing on “Diverse Asset Managers: Challenges, Solutions and Opportunities for Inclusion.” Martinez’ full oral testimony, as prepared, can be read here.
Earlier this month, Martinez published an op-ed refuting common excuses not to invest with diverse-owned firms. Bella also published a Knight-funded study that found that private equity investors were statistically less tolerant of underperformance by diverse-owned firms.
Knight is not the only foundation to commit to diversifying its asset management. The Kresge Foundation recently pledged to get to 25% diverse asset management by 2025. The Kellogg Foundation and the Silicon Valley Community Foundation are also leaders in this area. Princeton University, the country’s fourth-largest university endowment, recently embarked on a campaign to diversify its asset managers.
Still, it’s public pension funds and wealthy individuals who make up the principal clientele for diverse-owned firms, Martinez said in his testimony, while other types of institutional investors stay with what they know.
Image (top) by Ken Lund, used under Creative Commons Attribution-ShareAlike 2.0 Generic.