UK funds focus on manager diversity

A group of major UK pension funds have committed to assessing diversity and inclusion as part of manager selection.

The commitment comes in signing the Diversity Charter which has been devised by some of the largest pension funds in the UK, forming a group called the Asset Owner Diversity Working Group, co-chaired by Helen Price who is stewardship manager at Brunel Pension Partnership and David Hickey, portfolio manager at Lothian Pension Fund.

The signatories include Brunel, Nest, RPMI Railpen, West Midlands Pension Fund, Lothian Pension Fund, and London CIV. Together they represent more than £125 billion in assets under management.

Diversity questions will form part of the overall assessment scores for each bidder, meaning fund managers wanting to work with these clients will have to disclose information and demonstrate real devotion on how they are tackling diversity and inclusion within their workforce.

Signatories also commit to including diversity as part of ongoing manager monitoring, a questionnaire will be provided to managers annually for completion.

A key aim of the group was to create standardisation to improve disclosure. The charter questionnaire has been developed to be progressive and equip signatories to hold firms to account for ongoing progress. It goes beyond asking about the strategic approach, to identify how managers look at diversity and inclusion across five key areas: industry perception, recruitment, culture, promotion and leadership.

It includes a range of qualitative and quantitative questions ranging from board composition to mentoring, promotion and paternity leave.

“We expect fund managers to manage diversity as a material investment issue, but we question how well they’re doing this if they’re doing little to address it in their own organisations,” Brunel’s Price says. “We want to help raise the bar on diversity disclosure across the investment industry by requesting data that is meaningful to us but also to the managers themselves.  By asking for this information fund managers will have to confront poor performance and begin taking much needed action on diversity.”

Other signatories outside the initial steering group include: Avon Pension Fund, Barnett-Waddingham, Church of England Pension Board, Coal Pension Trustees Investment, Cornwall Pension Fund, Environment Agency Pension Fund, LCP, LGPS Central Limited, Local Pensions Partnership Investments Ltd, Redington and Willis Towers Watson.