Asset owners increasingly encourage their asset managers to improve diversity, but both owners and managers report the need to grow diverse talent coming into the investment industry, according to recent research from asset managers and owners including Unilever and the New York Presbyterian Hospital for Russell Investments conducted by Cerulli Associates, the global research and consulting firm.
Asset owners and managers says their efforts to recruit and hire diverse employees is limited by small pools of talent. Solutions include broadening the group of universities from which they draw talent or specifically targeting certain Historically Black Colleges and Universities.
For entry-level roles, asset managers have traditionally targeted certain universities, falling in line with “you hire who you know” thinking. Some have addressed this by expanding the group of universities from which they draw talent. Others have implemented “blind” hiring processes, where they don’t target any specific universities.
Some participants (both asset owners and managers) said that their companies have begun to broaden their focus on academic majors as well. For experienced candidates (non-entry-level roles), organizations are broadening their focus to roles outside the asset management space. Notably, for some positions that require asset management experience, this is more challenging and highlights the reason why industry participants are putting efforts into growing the pool.
Survey respondents also cited challenges in retaining diverse talent at the mid- level career point. Measures meant to address this problem include the provision of career development and mentorship programs, while employee engagement surveys help investors identify areas of “flight risk” as well as the ability to assess their level of inclusivity. Self-evaluation surveys are used to measure an organization’s level of inclusivity. Other tools used are alternative meeting formats, where employees are given the opportunity to speak their mind both before and after meetings.
The survey found firms are competing for the same limited pool of candidates for roles requiring experience in the asset management industry. This especially applies to roles requiring investment management experience.
By including diversity inquiries in their RFPs, asset owners encourage managers to consider diversity at their own organizations and adopt measures to improve. Many asset owners questioned spoke of efforts to select woman- and minority-owned firms as asset management partners. However, others say that looking at diversity at the ownership level within an asset manager is an incomplete approach, as it does not consider the diversity of the employee base.
Asset managers tend to be larger than asset owner investment offices which has several implications for their D&I approach. Namely, they are able to evaluate diversity more granularly and can gain exposure to more demographics and absorb the corresponding costs more easily.
Factors driving owner and manager’s diversity efforts include both internal and external demand. Internal demand refers to demand from within the organization – either top-down or grassroots bottom up. For institutional investors, external demand comes from end-beneficiaries and, in the case of corporates, clients that their sponsoring organizations serve.
We just need more
Some asset owners and managers told Cerulli that they do not have specific diversity benchmarks or targets. These organizations are more directional, taking the approach, “We just need more.” While they are not necessarily behind in considering diversity measures, these organizations tend to be further behind in achieving results.
“Changing the makeup of your employee base is not something that you can do quickly. You want it to happen naturally over time. That departure of early career hires is something we’ve tried to fix through development and mentorship programs. The jury is still out on trying different things. Large firms have the resources to do those things. Do smaller firms have the ability to do that? I don’t know,” said one asset owner respondent.
In addition to forming their own peer-to-peer partnerships, asset owners and managers look to partner with third-party organizations specifically formed to address diversity. Examples of these third parties include non-profits such as Girls Who Invest, The Robert Toigo Foundation, and Invest in Girls.