Learning and Impact

America’s top foundations overwhelmingly invest their assets through white male-led firms, but a new study sees growing commitment to diversity

New study reveals that 30 of the 55 largest foundations are currently investing one in six dollars of their total U.S.-based financial assets with diverse-owned asset management firms.

MIAMI — September 30, 2021 — The John S. and James L. Knight Foundation released its latest findings today on who is managing the endowments of many of the nation’s largest philanthropies. The study revealed that, while grantmakers across the United States still overwhelmingly trust their billions in assets to white male managers, a growing number of foundations are making commitments to diverse-owned asset managers.

The new report, “Knight Diversity of Asset Managers Research Series: Philanthropy,” an update of the 2020 study, is part of its commitment to advancing diversity in the asset management industry. The new report reveals that:

  • The nation’s top 55 charitable foundations hold $300 billion in total assets. Thirty foundations, with $166 billion in total assets, participated in the study this year, demonstrating an increased commitment to transparency in the sector.
  • Those 30 foundations invest $11.07 billion, or 16.6% of their $67 billion in U.S.-based investment assets with firms owned by women and minorities.

The study, conducted by Candice Rosevear, a principal in the labor and discrimination practices and head of data analytics at Global Economics Group, reveals that leading grantmakers in the philanthropic sector are far outpacing the rest of the financial industry, where only 1.3% of investments are invested with firms owned by women and people of color, in entrusting their investments to diverse-owned asset management firms. Four foundations invest a third, if not more, of their assets with diverse-owned firms.

“Who you trust to manage your money speaks volumes about your values,” said Alberto Ibargüen, president of Knight Foundation. “Knight conducts this research in order to hold ourselves accountable to our mission and to encourage more transparency from our peers.  I am confident we can do better as a field to not only spread our wealth and net strong returns, but consciously diversify who manages it.”

Many of the nation’s largest foundations generously opened their financial books to researchers, including The Robert Wood Johnson Foundation, Silicon Valley Community Foundation, W.K. Kellogg Foundation, The Andrew W. Mellon Foundation, John D. and Catherine T. MacArthur Foundation, Walton Family Foundation, Tulsa Community Foundation/George Kaiser Family Foundation, The Rockefeller Foundation, The Chicago Community Trust and Casey Family Programs. An asset manager and three foundations also contributed essays on this topic to underscore its importance: Ariel Foundation, The Robert Wood Johnson Foundation, Casey Family Programs and The Chicago Community Trust.

This is the latest report in Knight’s decade-long campaign to advance diversity and equity in the asset management industry, which includes the Knight Diversity of Asset Managers (KDAM) Research Series. More foundations have participated in this research during this period. These foundations, and any others that join this assessment in the future, are welcomed into the “Circle of Transparency.” Knight and its research partners are hopeful even more foundations will broaden this Circle in the years to come. 

The needle is slowly moving in this critical area. Comparing the data from the 2020 study with this one, 25 leading foundations have increased investments with diverse-owned firms by $1.37 billion. Still, this means that the percent of their endowments that are with diverse owned first have only increased in aggregate by a little over one percentage point.

“We know from past research that diverse-owned firms are severely underrepresented in the industry, even though their investment returns are statistically the same as other firms,” said Juan Martinez, Knight’s chief financial officer and treasurer. “Across the financial sector, just over one percent of U.S.-based assets are managed by women- and diverse-owned firms. That is not what equity looks like. This lack of diversity in who manages hundreds of billions in philanthropic endowments helps entrench and exacerbate persistent racial and gender inequities in the asset management industry. We all have a vital role to play and transparency is the best first step to take.”

The study’s findings include:

  • Of the total $67 billion in philanthropic assets analyzed, $11.07 billion (16.6%) is invested with diverse-owned firms. More specifically, $6.24 billion (9.3%) is invested with women-owned firms, and $6.70 billion (10%) is invested with people of color-owned firms. The sum of the two figures exceeds $11.07 billion because approximately 17% of the $11.07 billion is invested with firms that are both women- and minority-owned.
  • 90% of the 30 foundations participating this year invest some portion of their assets with diverse-owned firms. Nineteen invest more than 10%. Twelve of the participating foundations invest more than 20%.
  • Top four foundations — Casey Family Programs, Silicon Valley Community Foundation, Tulsa Community Foundation/George Kaiser Family Foundation and Knight Foundation — invest more than 34% of their assets with diverse-owned firms.
  • Five new foundations participated in the refreshed study, and foundation participation was higher overall. However, 14 of the top 55 foundations elected not to disclose statistics, by either declining to participate or not responding to requests.

Past Knight-commissioned research has shown that diverse-owned firms are severely underrepresented in the industry, even though their performance is equal to other firms across asset classes. Firms owned by women and people of color manage a tiny fraction of the $69 trillion under management across the financial sector — just 1.3% of U.S.-based assets. Knight’s study on the financial industry will be released in late 2021/early 2022.

For interviews about the Knight study, please contact Nick DeSantis at 202-288-9534 or [email protected]. Visit kf.org/KDAM to learn more about the Knight Diversity of Asset Managers (KDAM) Research Series.