Throughout its history, the U.S. domestic Asset Management Industry, projected by PwC to grow to $71.2 trillion in assets under management by 20251, has exhibited an empirical lack of diversity with respect to gender and ethnicity within its ranks. Numerous studies have shown that Women and People of Color (“POC”) are underrepresented in the Industry, including a 2019 study commissioned by the Knight Foundation finding that Asset Management firms owned substantially or majority-owned by Women or POC managed only 1.3% of the Industry’s total assets under management. Encouragingly, we do know that for many in the Limited Partner allocation universe, Diversity, Equity & Inclusion (“DEI”) is being prioritized in manager diligence and monitoring processes. We even see investors that may not have formal Emerging or Diverse Manager programs applying diversity factors when assessing potential investments. Despite these trends, efforts remain inconsistent and uncoordinated. If you are an asset manager raising capital, you have likely seen this evidenced throughout processes that request “diversity” data around varied definitions and standards. Recognizing this, we highlight two themes around DEI initiatives in Asset Management that we view as vital focus points to achieve meaningful, coordinated progress:
1) Perhaps most importantly, there has been no actionable, standardized DEI measure that all Industry participants can leverage as a baseline and measuring tool for accountability and improvement. While there are selected metrics around ESG components, they are either too narrowly focused when it comes to DEI metrics, or too broadly so; and
2) Arbitrary thresholds for what constitute “Diverse Asset Managers” paint an incomplete picture of the state of DEI, and exclude a large group of vital participants from the conversation Our observations around deeper engagement with respect to DEI in Asset Management from various Industry stakeholders lead us to conclude that advanced efforts require a new standardized and coordinated measuring methodology, one that all Industry participants can rely upon, and take part in. Momentum is building for the adoption of a standard performance indicator – a “FICO® Score” for DEI assessment.