From the Editor

Lack of diversity in asset management laid bare

Did you know that 90% of US fund managers are white, yet firms with racial diversity are 35% more likely to have above-median returns? These are just two of many startling statistics.

Lack of diversity in asset management laid bare
Mellody Hobson will have a fireside chat on diversity at AsianInvestor's event on March 18

In advance of AsianInvestor's first Diversity in Asset Management forum* in Hong Kong this month, US fund house Ariel Investments has researched some damning data on the industry (see below).

Mellody Hobson, president of Ariel Investments, will have a fireside chat on diversity with AsianInvestor editor Leigh Powell at the Mandarin Oriental Hotel on March 18 (see accompanying article in today's newsletter).

Hobson has become a recognised voice in America on financial literacy and investor education, and is a regular contributor and analyst on finance and economic trends for CBS News.

She is also a spokesperson for the Ariel/Hewitt Study: 401(k) Plans in Living Colour and the Ariel Black Investor Survey, both of which examine investing patterns among minorities.

* For more information, including attendance and sponsorship opportunities, please contact Minal Khilani on minal.khilani@asianinvestor.net or +65 6579 0103.

Diversity in asset management

DATA

SOURCE

Companies in the top quarter in regard to racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians.

Vivian Hunt, Dennis Layton, and Sara Prince, “Diversity Matters” (report, McKinsey & Company, London, November 24, 2014).

Companies in the bottom quarter in regard to gender, ethnicity and race are statistically less likely to achieve above-average financial returns than the average companies in the data set. This data means that companies in the bottom quarter in regard to diversity are not leading the industry – in fact, they are lagging behind. As above

A linear relationship exists between racial and ethnic diversity and better financial performance in the US: for every 10% increase in racial and ethnic diversity on the senior executive team, earnings before interest and taxes rise 0.8%.

As above

Nearly 90% of asset managers are white and around 75% are white men.

Chief Investment Officer Magazine, “Whiteout: The Staggering Sameness of Asset Managers",  September 2014

African-American and Latino employees together make up 28% of the US workforce – but only hold 3% of leadership positions in the investment industry.

As above

On average, the performance of asset management firms owned by women and minorities, both in terms of absolute returns and risk-adjusted returns, is stronger than the performance of firms that are not owned by minorities – and this superior performance carries across all asset classes.

Barclays Capital’s Capital Solutions Group, Affirmative Investing: "Women and Minority Owned Hedge Funds.”

A fund-weighted index of single-manager women- and minority-owned hedge funds generated a cumulative return of 82.39% for the five-year period ending March 2011, while an index of single-manager, non-diversity funds returned only 51.00%.”

As above

A 2012 report by the National Association of Investment Firms (NAIC), found that: “NAIC Firms have produced superior investment returns over a sustained period benchmark [1998 to 2010] against the general PE [private equity] industry, including the buyout subset . . . in each of the four industry benchmarks.”

National Association of Investment Firms (NAIC), “Recognizing the Results—The Financial Returns of NAIC Firms: Minority and Diverse Private Equity Managers and Funds Focused on the U.S. Emerging Domestic Market” (report, KPMG, Washington, DC, and New York, 2012). The last reports on the performance of firms owned by women and members of minority groups used data from 2011; further study, using more recent data, would be desirable.

A woman is less likely to be running a US mutual fund than working as a doctor (37%), lawyer (33%), accountant or auditor (63%). Women are also better represented in law leadership ranks: 20% of law firm partners are women, while 24% of federal judges are women. Moreover, 19% of partners in US accounting firms are women.

Enterprising Investor, “Women in Investment Management: The Business Case for Diversity”, June 30, 2015

“When we looked at teams that were run by men and women together, when we have collaboration and diversity of thought, that was actually the bucket of performance that we saw outperform more than any of the others across both short and long time periods. So I think it’s really confirming that having a diversity of thought and opinion going into portfolio management of the funds that you are looking at makes a really big impact.”

Heather Brilliant, CFA, chief executive of Morningstar Australasia at the 2015 Women in Investment Management Conference in San Antonio, Texas

As above

“Having a diverse team managing portfolios has a far better outcome. That has been my experience running a mutual fund business and then moving over to the endowment space. But I will second the comment that there are so few women to study.”

Rice University does not – and has never had – a female hedge fund manager investing for the institution.

Allison Thacker, president of the Rice Management Company at the 2015 Women in Investment Management Conference in San Antonio, Texas

As above

Source: Ariel Investments research

¬ Haymarket Media Limited. All rights reserved.


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