For a long time, a lack of good data has prevented diverse investment managers from being hired by institutional clients. That’s about to change, due to the efforts of the Institutional Investing Diversity Cooperative, which Sellwood recently joined.
Members of the Cooperative believe that diverse investment teams make better investment decisions, and that including more women and people of color in asset management roles improves portfolios and our greater community.
As a starting point, members of the Cooperative have partnered with eVestment, the industry’s leading investment manager database, to demand greater transparency regarding the diversity within the asset management firms we research and recommend. We expect further partnerships in the future.
Better data is only the first step, but it is a good start.
Several databases of investment manager information are available to institutional consultants. We have written that the amount of investment manager data available for us to review is so vast that it is almost beyond comprehension – thousands of data elements, times tens of thousands of managers. But there is one place where data is sorely lacking – data regarding ethnic and gender diversity of the teams of people who directly manage our clients’ money. Most databases include a field for the gender or ethnicity of the firm’s owner, but not much else. While we care about who owns every investment management firm that we research on behalf of clients, we care just as much about the teams of people who actually manage clients’ assets.
The limited availability of data regarding investment manager diversity is why our industry generates so many searches for “woman-owned” or “minority-owned” investment firms. Using existing databases, a consultant can screen on those ownership fields. But there simply isn’t robust and reliable data to screen for what we and clients care about just as much – the diversity of the team directly responsible for managing the client’s money, as opposed to the recipient of the firm’s profits. Both are important, and we have data on only one.
Why has this diversity data been limited? Because historically, nobody has demanded better data. The Institutional Investing Diversity Cooperative is changing that. The Cooperative now includes 22 investment consulting firms, advising more than $32 trillion of institutional assets, a coalition of institutional asset advisors that will be difficult for investment management firms to ignore. Together, we demand the tools and transparency to better evaluate the diversity of our clients’ money managers. With more robust data, we can do a better job of including more diverse teams in client portfolios.
What doesn’t get measured doesn’t get done. Measurement isn’t everything, but it’s the necessary first step.