Sustainability Digital – March 2021

Why diversity is important at CalSTRS

On International Women’s Day spoke to CalSTRS CIO, Chris Ailman about diversity and inclusion.

The $214 billion fund for California teachers has been a leader on D&I in the investment industry, demonstrated through gender parity in its investment team and the publishing of an annual report on diversity for the past 10 years.

Ailman, who was recently part of the steering committee for the CFA Institute’s diversity and inclusion project, believes diversity of thought leads to better risk adjusted outcomes and better investment decisions.

He gives the industry some pointers on how to improve its score on diversity and inclusion.

Why is diversity and inclusion important?

I believe human capital is the most important asset in the investment management industry.  Diversity of people brings diversity of thought and that leads to better risk adjusted outcomes and better investment decisions.   Therefore, diversity is critical to our industry and a key requirement to improving results.

Of the 20 action points in the CFA Institute report, Driving Change: Diversity and Inclusion in Investment Management, which do you think is the most important for asset owners and asset managers to embrace if they want to be more inclusive and diverse?

Without a doubt its number 1, especially in California. The meaning of diversity has changed and expanded over the years.  A definition is critical, because then you can measure it, and in our industry, what gets measured gets managed.

Click here to read Driving Change: Diversity and Inclusion in Investment Management

What motivated you to be part of the steering committee?

CalSTRS has been an industry leader in diversity and inclusion within the investment industry.  I am personally very motivated to try to change the face of Wall Street.  I think it will make our industry more respected and accepted.

What were you surprised about in the findings?

Yes and no. Sometimes you know things are bad, but you still shocked at the actual numbers.  I was pleasantly surprised by so many of the bright and clever ideas to bring about change. I also gained a much better understanding with regards to expanding the meaning of diversity with the inclusion.

What practices do you employ at CalSTRS to ensure you have diversity and inclusion?

Diversity is one of the core values of CalSTRS.  In the past year, every member of the staff participated in a Diversity & Inclusion training class, plus the leadership participated in an addition training class on employer diversity & inclusion.  We have embraced diversity within the Investment Branch since our origin in 1983. We were one of the first Fund to develop a long-term business plan to expand the Diversity of the Management of Investments.  In the 2000’s, we conducted surveys of our managers and developed emerging manager programs across the portfolio.  Since 2007 we have produced and annual report on our diversity efforts.

What does diversity look like at your organisation?

It depends on how you define diversity! Within the Investment Branch we have 50/50 gender diversity.  Within the top investment management ranks we are now exactly 50 / 500 gender diverse. We are roughly 40% minority and 60% Caucasian in ethnic diversity. But we do not yet other definitions of diversity.

What can the industry do as a collective to improve its score on diversity and inclusion?

Two M’s and three P’s.  First Measure and Manage diversity as a critical part of their human capital management efforts. Just as we would not hesitate to measure and manage the diversity of our portfolio risk, we need to do the same with our investment teams. Second, Pipeline, Parity, and Promotion.  We need to continue to build the pipeline of young talent across the globe, our industry has a terrible image from TV and Hollywood. Second, we need to be very, very conscious and intentional about Parity of the duties, opportunities and salary. Lastly promotion, we need to be intentional about diversity and promote it within our firms and across our industry.

Do you think diversity drives better outcomes? Why/How?

Yes. Group think within the markets and finance industry has led to some catastrophic failures and losses.  Group think of similar people with similar life experiences, educations, and location has failed to pick up exogenous risk time and again.  Diversity and inclusion will not stop all failures, but it will open the environment to ask more questions, consider risks differently and in the end lead to better decision making and better long-term outcomes.


Other stories on diversity published on International Women’s Day

CFA drives diversity agenda

The CFA Institute will work with 30 asset owners and managers as “experimental partners”, implementing diversity and inclusion action plans in their businesses. We spoke to CFA’s Rebecca Fender about the importance of diversity.


Industry inflection point on diversity

On International Women’s Day spoke to Mass PRIM CIO, Michael Trotsky about diversity and inclusion.

Trotsky, who was recently part of the steering committee for the CFA Institute’s diversity and inclusion project, which resulted in the report, Driving Change: Diversity and Inclusion in Investment Management. He believes the industry is at a perfect inflection point to make inroads into improving its score on diversity.

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