Asset Manager Diversity Linked to Better Investment Returns

Its analysis of diversity and performance outcomes of 400 investment products across a number of asset classes over several years found that investment teams that were ethnically diverse tended to generate better excess return.

Given these results, the firm notes it may downgrade the rating of an asset management firm if, when working to improve its diversity, the firm fails to encourage greater diversity or doesn’t respond to growing asset owner expectations.

“The diversity characteristics of the asset managers in our industry are a long way from being representative of the broad society,” according to the report. “This implies we must be missing out on talent and failing to deliver optimal diversity of thought, which is bad for savers.”

The study recommends several steps for asset managers to improve diversity, including:

• Greater transparency and disclosure about diversity within different firm functions
• Increased sourcing of diverse talents through graduate programs and programs for professionals returning to the workforce
• Progressive compensation structures and policies around flexible working arrangements
• A shift away from a star portfolio manager model to a team-based investment approach, with a strong focus on diverse decision-making teams
• A focus on internal policies, training and networks designed to increase diversity and address challenges of racism

— Related on ThinkAdvisor:

• Why Diversity Hires Mean Growth for Advisors: Study
• We Asked, Advisors Answered: How Can the Industry Increase Diversity?
• What the Top BDs of 2020 Are Doing to Improve Diversity
• Bank America Wants More Diversity on Its Investment Platform