A study on the degree to which the endowments of the country’s wealthiest philanthropic foundations are hiring asset management firms owned by women and racial or ethnic minorities
This study is Knight’s third review of diversity in asset management at the nation’s largest charitable foundations. We do this research to provide examples of diverse, effective investing to the broader market and to stimulate a conversation about how well leading philanthropies live up to the values of equity and inclusion.
By now, you’ve likely heard our story. Twelve years ago, when we first looked at the percentage of our endowment that was managed by diverse owned firms, we were appalled at how low it was. Today, we are proud to have a high-performing endowment with over $1 billion managed by diverse owned firms.
This transformation required careful planning, consistent effort, and a willingness to learn from our peers. Along the way, we’ve encouraged fellow foundations and other mission-driven organizations to learn with us and turn that learning into action. This year, we are excited that so many foundations are true leaders on this issue. We celebrate that the Robert Wood Johnson Foundation has the most invested with diverse owned firms at $1.64 billion and that several foundations have more than a third of their U.S. based assets invested with diverse owned firms.
Overall, the data in this year’s study shows continued — but still incremental — progress. Since our last report, we’ve observed that the percentage of foundation endowments managed by diverse owned firms has slightly increased from 16.6% to 18.1%.
It’s clear that foundations set a positive example in the investment world which remains overwhelmingly white and male. Their investments exceed the industry standard of 1.4% invested with diverse owned firms. This group of sophisticated investors, who depend on their returns to fund their social investments, have seen the opportunity in diverse managers and are allocating their money accordingly. By diversifying investment decisions makers, they are consciously avoiding “group think” in investment decisions and expanding the range of their investment opportunities.
But at the same time, progress remains slow and transparency is lacking. Similar to last year’s study, 15 foundations declined to participate or did not respond to our requests at all.
Knight’s experience demonstrates that change is possible, but transformation begins with openness. Our field cannot inspire change unless we’re honest about our own shortcomings.
Transparency and better data will be vital to assessing how well our field is positioned to meet the challenges and opportunities of tomorrow’s economy. We hope this study enriches your understanding of this important issue and renews conversations about how our field can honor its commitments to equity and inclusion.
Ashley Zohn, Vice President/Learning and Impact
Juan Martinez, Vice President/Chief Financial Officer
This study reports on the representation of women- and racial or ethnic minority- owned investment firms (“diverse-owned firms”)1 among those used by the country’s wealthiest philanthropic foundation endowments. This is our third study of charitable foundations in the Knight Foundation Diversity of Asset Managers (KDAM)2 series. In this study, we again evaluate the top 55 foundations, which collectively hold $329 billion in total assets.3
We observe: Increased investing with diverse-owned firms among study participants. Of the $78.86 billion in assets under management (“AUM”) with U.S.-based firms, 18.1% is invested with diverse-owned firms, up from 16.6% in 2021 and 16.2% in 2020.
Greater participation and transparency. Thirty-five foundations participated in the study, up from 33 in 2021 and 26 in 2020. Twenty-one fully transparent foundations identified their U.S.-based assets and provided manager rosters for analysis, eight participated passively by including some or all of their asset manager rosters in their publicly available IRS Form 990/990-PF tax returns, which we were able to extract and analyze, and six self-reported diversity figures from their own internal analysis using this study’s definitions.
- Increased investing with diverse-owned firms among study participants. Of the $78.86 billion in assets under management (“AUM”) with U.S.-based firms, 18.1% is invested with diverse-owned firms, up from 16.6% in 2021 and 16.2% in 2020.
- Greater participation and transparency. Thirty-five foundations participated in the study, up from 33 in 2021 and 26 in 2020. Twenty-one fully transparent foundations identified their U.S.-based assets and provided manager rosters for analysis, eight participated passively by including some or all of their asset manager rosters in their publicly available IRS Form 990/990-PF tax returns, which we were able to extract and analyze, and six self-reported diversity figures from their own internal analysis using this study’s definitions.
We thank all 35 foundations for their participation.
The 21 fully transparent participants providing manager rosters are (ordered by total assets):
The Robert Wood Johnson Foundation, Silicon Valley Community Foundation, W.K. Kellogg Foundation, John D. and Catherine T. MacArthurFoundation, The Andrew W. Mellon Foundation, Walton Family Foundation, The Rockefeller Foundation, The JPB Foundation, The Duke Endowment, The Kresge Foundation, Robert W. Woodruff Foundation, Chicago Community Trust, The California Endowment, John Templeton Foundation, The New York Community Trust, The Harry and Jeanette Weinberg Foundation Inc., Colorado Health Foundation, Ewing Marion Kauffman Foundation, McKnight Foundation, Casey Family Programs, John S. and James L. Knight Foundation
The 8 passive participants providing manager rosters in their IRS Form 990/990-PFs are:
Bill & Melinda Gates Foundation, The Leona M. and Harry B. Helmsley Charitable Trust, Tulsa Community Foundation/George Kaiser Family Foundation, The Carl Victor Page Memorial Foundation, Carnegie Corporation of New York, Good Ventures Foundation, Richard King Mellon Foundation, The Wyss Foundation
The 6 self-reporting participants are:
Two prior study participants, Cleveland Foundation and Foundation For The Carolinas, are not among the top 55 foundations this year. They recognize the importance of transparency and provided their asset manager data for this study. We include an analysis of their manager rosters separately in the body of the report. We also thank them especially.
While we appreciate all the above foundations for their varying levels of transparency, those providing their full U.S.-based manager rosters add critical data that improves the overall accuracy of our report. Not only does that data contain a comprehensive list of the portfolio’s managers but it oftentimes also includes manager ownership demographics that does not appear in third party demographic data. We are then able to attribute this demographic data across all participant portfolios and so provide a more accurate report.
With the current data, we were able to calculate detailed statistics for the 29 foundations that provided asset manager rosters for analysis, the 21 fully transparent foundations that directly provided their asset manager rosters to us and the eight foundations that included some or all of their asset manager rosters in their publicly available tax returns. These 29 foundations allocate $78.86 billion in assets under management (“AUM”) to U.S.-based firms that are eligible for analysis in this study (“Analyzed AUM”).4
The study finds:
- $14.28 billion (18.1%) is invested with diverse-owned firms. The remaining $64.58 billion (81.9%) is invested with firms primarily owned by white men.5
- $6.91 billion (8.8%) is invested with women-owned firms and $9.61 billion (12.2%) is invested with minority-owned firms, as defined in Appendix A.6
- The average foundation invests 20.3% of its assets in diverse-owned firms, and the median foundation invests 19.2% in diverse-owned firms.
Asset manager diversity varies greatly across the foundations. As Figure 1 shows, all but four (86%) of the 29 foundations invest some portion of their U.S.-based assets with diverse-owned firms. Eighteen (62%) invest more than 10% of their assets with such firms. Seven (24%), which is three more than last year, invest more than 30% of their assets with diverse-owned firms.
Table A in the main body of the report provides the individual detailed results for these endowments and breaks down the results for the 21 fully transparent participants and eight passive participants.
Table B in the main body of the report provides the individual statistics for the six foundations that provided self-reported diversity statistics using their own internal analysis and this study’s definitions.7 The six self reported figures could not be independently verified or analyzed at the manager level and are therefore excluded from the summary statistics above.
We hope that the other invited foundations that chose not to participate in this study will reconsider their decision in the future:8
J. Paul Getty Trust, Ford Foundation, The William and Flora Hewlett Foundation, The David and Lucile Packard Foundation, Gordon and Betty Moore Foundation, Chan Zuckerberg Foundation, Simons Foundation, Shelby Cullom Davis Charitable Fund, The William Penn Foundation, Sergey Brin Family Foundation, Oregon Community Foundation, Charles and Lynn Schusterman Family Foundation, Maxcess Foundation Inc., (Phil) Knight Foundation, Laura and John Arnold Foundation
Finally, 27 foundations, both participants and nonparticipants, provided comments for the study. They used this opportunity to provide details regarding their own work in this area, describe other methodological criteria that could be used to assess the diversity of their endowment or to explain why they did not participate. Appendix B provides those comments, which are a rich source of qualitative information.
We believe the results from this study provide valuable insight for understanding where the field of philanthropy is today on the issue of investing with women- and minority-owned asset management firms and for setting future goals.
Why (and How) Do We Measure Diversity of Asset Managers?
Why Do We Measure Diversity of Asset Managers?
The field of asset management suffers from a lack of racial, ethnic and gender diversity. Minorities and women make up 70% of the U.S. working-age population and 68% of college graduates,9 yet diverse-owned firms manage only 1.4% of assets under management (AUM) in the United States, according to a recent Knight Diversity of Asset Managers (KDAM) study.
That study, and the two in the series that proceeded it, found no statistically significant difference in risk- adjusted returns between diverse-owned and non-diverse-owned asset management firms. Put another way, despite no performance advantage, firms primarily owned by white men manage 98.6% of the over $80 trillion under management in the United States. And that $80 trillion represents more than three times the entire GDP of the United States.
A separate KDAM study shows that that diverse-owned firms are three times more likely to employ diverse portfolio management teams than those led by white men, potentially increasing opportunities for women and minorities in the field of finance.
We commend those acting to improve diversity in asset management––and especially the foundations that participated in this study––for paving the way for greater transparency. As change continues to occur, clearly defined measurement will allow us to best monitor progress.
How Do We Measure Diversity of Asset Managers?
Diversity studies face inherent challenges. The United States has no federal regulatory reporting requirements on this topic or consistent informal standards. This leads to limitations on publicly available demographic data on investment firms and a lack of consensus on how to best measure diversity in the first place.
We conducted this study by measuring diversity with the most comprehensive publicly accessible data available and applying a process that is clear and replicable, based on objectively defined rules, as described in Appendix A. We have stressed transparency, a commitment to accuracy and an openness to participant input.
This study focuses on diversity of investment firm ownership because it is the most widely available metric. The study used third-party data as a starting point for determining the ownership diversity of investment firms. We also encouraged foundations to provide insight into the diversity of ownership of the firms with which they have investment relationships.
We then used these insights to inform the study and enrich the demographics dataset the study relies upon.
In the spirit of collaboration and transparency, Global Economics Group shared underlying individual results with each participant to allow the foundations to review, audit and, if necessary, correct or clarify the underlying data.10 The foundation’s due diligence data and the participant review process were critical to the success and accuracy of this study.
Ownership vs Team Metrics
Several eligible participants in this study–– and in KDAM’s 2020 and 2021 philanthropy studies––suggested decision-maker diversity would be a better diversity measure than ownership if it were widely available. In response, Knight Foundation and Global Economics Group released a report that explores the relationship between the two metrics. It found a statistically significant positive correlation between diversity of ownership and diversity of decision-making portfolio management teams.
Results of the 2022 Diversity of Asset Managers Study
This study assesses the representation of women- and racial or ethnic minority-owned investment firms (“diverse-owned firms”)11 among those used by the country’s wealthiest philanthropic foundation endowments. Knight Foundation and Global Economics Group released studies in 2020 and 2021 on the diversity of the asset managers used by the United States’ top charitable foundations. In this third study of charitable foundations, we evaluate the top 55 eligible foundations, which collectively hold $329 billion in total assets.12
Thirty-five foundations participated in the study this year, up from 33 in the 2021 report and 26 in our initial 2020 report. Twenty-one fully transparent foundations identified their U.S.-based assets and provided manager rosters to Global Economics Group for analysis, eight participated passively by including either all or some of their manager rosters in their publicly available IRS Form 990/990-PF tax returns and six self- reported diversity figures from their own internal analysis using this study’s definitions.
In addition to greater overall participation, we also observe greater transparency: fully transparent foundations––i.e., foundations that identified their U.S.-based assets and provided manager rosters to Global Economics Group for analysis––increased from 12 in 2020, to 19 in 2021, to 21 in this study. Conversely, passive participants––i.e., foundations that participated by disclosing a partial list of asset managers in their IRS Form 990/990-PF tax returns––declined from 14 in the 2020 edition of our report, to 11 in 2021, to 8 in this study.
Fully transparent participants give us the clearest view into which firms manage their endowments, providing full enumeration of their asset manager rosters compared to participants who participate passively.13
In addition, the data provided by fully transparent participants oftentimes includes manager ownership demographics information that does not appear in third party demographic data. We are then able to attribute this demographic data across all participant portfolios and so provide a more accurate report. The greater the number of foundations providing full manager rosters for analysis, the more accurate the analysis.
Table A provides the detailed statistics for the 29 foundations that provided asset manager rosters or made their asset manager roster publicly available. The table breaks down the results by fully transparent foundations and those foundations that participated passively through their tax returns.
The study finds:
- Overall, the 29 foundations allocate $78.86 billion in assets under management (“AUM”) to U.S.-based firms that are eligible for analysis in this study (“Analyzed AUM”).14 Of that, $14.28 billion (18.1%) is invested with diverse-owned firms. The remaining $64.58 billion (81.9%) is invested with firms primarily owned by white men.15 $6.91 billion (8.8%) is invested with women-owned firms and $9.61 billion (12.2%) is invested with minority-owned firms, as defined in Appendix A.1617
- Across the 21 fully transparent foundations, $12.06 billion (19.0%) is invested with diverse-owned firms. $5.78 billion (9.1%) is invested with women-owned firms and $8.44 billion (13.3%) is invested with minority-owned firms.18
- Across the eight passive foundations, $2.22 billion (14.6%) is invested with diverse-owned firms. $1.14 billion (7.5%) is invested with women-owned firms and $1.17 billion (7.7%) is invested with minority- owned firms.19
*“Minority” in the available datasets refers to people who are Hispanic, Black, Asian and “other,” which includes Native American, Pacific Islanders and others. We are unable to provide a breakdown by race and ethnicity due to data limitations.
The Total Assets column is used only to rank and identify the top foundations in terms of total assets––it is not used in the calculations––and is therefore deemphasized in gray text in the table. Total Assets is sourced from Candid and is based on total endowment assets as of December 31, 2019 (most commonly). Candid relies on the balance sheet of IRS Form 990/990-PFs, which typically lags fiscal year reporting by 18 to 24 months. See Appendix D for the exact dates of the data used in the study.
Analyzed AUM is sourced directly from the foundations or from the foundations’ publicly available IRS Form 990/990-PF. The value of invested endowment assets reflected in Analyzed AUM is most commonly as of December 31, 2021, and includes U.S.-based firms only.
Analyzed AUM may differ from Total Assets for three reasons:
- If some portion of the endowment is managed by foreign domiciled asset management firms, which are not the focus of this study, or is not managed by asset management firms at all (e.g., a decision made directly by the foundation to hold stock).
- If the two measures have different valuation dates.
- If only a portion of the foundation’s assets are available for analysis. For example, the Bill & Melinda Gates Foundation and Good Ventures include a partial list of asset managers in their available IRS Form 990-PF. For these foundations, the results from this study’s diversity analysis may or may not be representative of the foundation’s overall portfolio. The Bill & Melinda Gates Foundation’s diversity score of 9.2%, as only $1.53 billion in assets are analyzed, representing 3% of its $51.04 billion in Total Assets. Good Ventures has a relatively high diversity score of over 70%. But since we are only able to match asset managers to $0.70 billion––or 21% of its $3.34 billion in Total Assets––the diversity score may not be representative of the foundation’s overall portfolio.
Cleveland Foundation and the Foundation For The Carolinas are no longer in the top 55 list by Total Assets according to Candid but, upon invitation, provided their manager rosters for analysis as well as a comment for the study (see Appendix B). We thank them for their continued participation.
Additionally, six foundations chose to self-report diversity statistics using this study’s definitions.20 The self-reporting foundations did not provide asset manager rosters and the provided statistics could not be independently validated and are therefore not included in the summary statistics above. Table B provides the self-reported statistics.
Fifteen foundations chose not to participate in the study. Thus, we cannot assess the $85.63 billion in collective assets they hold. Table C lists those foundations and the total assets associated with each foundation.
Five foundations, with $46.56 billion in total assets, are excluded from the analysis because their assets are ineligible for analysis. For example, their holdings are largely held in unmanaged assets (Lilly Endowment Inc. and Kimbell Art Foundation) or their assets are largely managed internally (Foundation to Promote Open Society, Bloomberg Family Foundation, Inc., and Open Society Institute). Table D lists those foundations and the total assets associated with each foundation.
Twenty-seven foundations provided comments for the study. They used the opportunity to provide details regarding their own work in this area, describe other methodological criteria that could be used to assess the diversity of their endowment, or to explain why they did not participate. Appendix B provides those comments, which are a rich source of qualitative information.
Comparison with the 2020 and 2021 Diversity of Asset Managers in Philanthropy Studies
In this third study of charitable foundations in the Knight Foundation Diversity of Asset Managers (KDAM) series,21 we observe an increasing trend in the allocation of AUM to diverse-owned firms. As Figure 2 shows, the portion of Analyzed AUM allocated to diverse-owned firms by study participants has risen from 16.2% in the 2020 study, to 16.6% in the 2021 study, to 18.1% in the 2022 study.22
The demographic data of asset management firm ownership has evolved to become more accurate and comprehensive over time. To compare results across the three studies, we retroactively applied the 2022 demographic data and definitions to the 2020 and 2021 manager rosters and recomputed the diversity statistics for each sample.
The analysis excludes the foundations that provided self-reported statistics. Good Ventures Foundation and Colorado Health Foundation are new participants in the 2022 study. Robert W. Woodruff Foundation is a returning fully transparent participant, having also shared their asset manager data with us for the 2020 study, but they requested to be excluded from last year’s study because most of their holdings were in unmanaged, passive strategies. The Annie E. Casey Foundation and the William Penn Foundation were both passive participants in 2021, but they no longer report their holdings in their IRS Form 990-PFs with enough detail for us to identify asset managers. Since neither has made available suitable asset data for a fiscal year ending December 31, 2019 (the cutoff for this study), or more recent, we cannot include them as passive participants. Instead, the Annie E. Casey Foundation elected to self-report diversity measures for their asset managers, and The William Penn Foundation did not participate at all this year. Cleveland Foundation and Foundation For The Carolinas are no longer in the top 55 foundations per Candid’s rankings. They continue to share their data with us, which is reported separately in this report.
Of the wealthiest 55 foundations in the United States, 35 (64%) provided data for this year’s study. Those 35 foundations collectively hold $197 billion (60%) of the group’s total endowment assets. Of the $78.86 billion in assets under management (“AUM”) with U.S.-based firms at the 29 foundations we were able to study, 18.1% is invested with diverse-owned firms. The results of this report provide valuable insight into the asset management strategies employed by some of the wealthiest charitable endowments in the United States, which have tremendous potential to initiate change through their investment decisions.
We applaud study participants for their leadership. We encourage the foundations that chose not to participate in this study to do so in the future. We hope that this report prompts continued discussion, increased transparency and more action to address the important issue of diversity, equity and inclusion in the asset management industry.
Global Economics Group and Knight Foundation thank Mackenzie Endress of Global Economics Group for excellent research assistance and contributions and third-party data providers Candid, eVestment and Preqin for their guidance on navigating their databases along with their responsiveness to questions that arose during the study.