Many observers have lamented the lack of diversity in the asset management industry. Now, a study that looked at diversity within ownership of U.S. asset managers concludes that women and minorities are strikingly underrepresented in mutual funds, hedge funds, private equity and real estate.
The aim of the research was threefold: to better characterize the ownership diversity of U.S. asset managers; to examine the effect of diverse ownership on financial performance; and to study the composition of institutional investors that invest with diverse managers.
Josh Lerner, a Harvard Business School professor, and Bella Research Group led the research commissioned by the John S. and James L. Knight Foundation. The new report built on findings in a similar study published in May 2017.
Mutual Funds The research identified 136 women-owned firms managing $430 billion — 9.9% of firms and 0.8% of total industry assets under management — and 120 minority-owned firms managing $191 billion, which represented 8.8% of firms and 0.4% of total industry assets. Data came from the eVestment Traditional Database.
The study looked at diverse firms for every quarter from 2011 through 2017, and found underrepresentation of diverse-owned firms throughout this time period.
The analysis found no statistical difference in performance of funds managed by diverse-owned firms and ones managed by non-diverse firms. Separately, the analysis showed that diverse funds often had top-quartile returns: on average, 29% of minority-owned and 26% of women-owned funds were in the top quartile.
Based on fourth-quarter 2017 data, the most recent available, the study found that public funds and corporate clients had the largest amount of assets invested in women- and minority-owned funds, but noted that these investor types were heavy investors in mutual funds in general.
Investments from public funds, foundations, endowments, high-net-worth individuals and family offices represented a bigger share of assets under management in a typical women- or minority-owned fund than in non-diverse funds.