By ARLEEN JACOBIUS | Source: PIOnline
COVID-19 has illuminated shortcomings in how some workers are treated, leading some asset owners to look at including employee management considerations as part of their investment strategies.
Asset owners, by and large, already include employee considerations, dubbed “human capital,” as part of their ESG company engagement efforts and many view it as a potential risk to portfolios. But more recently, institutional investors, including CalPERS and CalSTRS, are contemplating whether to go beyond environmental, social and governance and devise an investment strategy with human capital management at the forefront.
It has been well established that women and minorities are underrepresented in the Asset Management Industry despite evidence that on average they have historically produced superior returns relative to the majority of their counterparts. The U.S. Government Accountability Office found that women and minority-owned investment firms managed only 1% of the $70 Trillion of assets under management in the United States.
However, it is also widely believed that diversity across practically any measure is additive. Many studies over the past several years have highlighted the potential economic and financial benefits of improved diversity. Here are 3 key statistics:
- A Harvard Business Review of VC firms showed that when firms increased their number of female partners by 10%, they saw their profitable exits rise by 10% and overall returns by 1.5%.
- According to a report by McKinsey, companies who rank in the top quartile for diversity are 35% more likely to earn returns above their industry median.
- Credit Suisse Research Institute found that companies in which at least ¼ of executives are women outperform the market by 3%. Furthermore, companies where at least ½ of executives are female outperformed the market by 10%.
As a result of many of the social ills facing this country, as exposed by recent events and the attention that they have garnered, we are witnessing renewed discussions around improving diversity within the asset management industry, and giving women and minority-owned asset managers access to larger institutional opportunities. The Diverse Asset Managers Initiative (DAMI) was established in 2017 and is a consortium of financial services professionals, institutional investors, corporate and philanthropic board members, and trade associations committed to raising awareness among institutional investors about the benefits and opportunities of investing funds with diverse owned asset management firms. You can read more about DAMI at www.DiverseAssetManagers.Org or read their Fiduciary Guide to Investing with Diverse Asset Managers and Firms on the SEC Website.