Many observershavelamented 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.
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 differ-
ence in performance of funds managed
by diverse-owned firms and ones man-
aged 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.
Using data from Hedge Fund Research —
which covers about half the hedge fund
industry, according to the study — the
research found that women owned 4.6%
of firms and just 1.5% of industry assets,
and minorities owned firms owned 8.9%
of firms and 2.7% of assets.
The study identified an upward trend
in women- and minority-owned hedge
funds since 2010, which has acceler-
ated since 2016. In addition, analysis
of top-quartile performance showed
that 26% of women funds and 28% of
minority funds exhibited top-quartile
returns, on average.
PRIVATE EQUITY AND REAL ESTATE
Data collection on diversity is relatively
new for both private equity and real estate,
according to the study. The research used
Preqin databases merged with hand-com-piled lists of diverse managers. It said data
coverage of diverse-owned private equity
firms was solid, while data coverage of
real estate was still an obstacle.
Only 5.2% of private equity firms identified in the research were owned by
women, and they managed approximately
The composition of institutional investors that committed capital to diverse-owned private equity firms showed that
on average, diverse-owned private equity
firms had fewer institutional investors
relative to the random sample.
Reach Michael S. Fischer at firstname.lastname@example.org.
By Michael S. Fischer
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