Nearly $590 billion in endowments at the wealthiest institutions of higher education are being monitored by asset management companies. In a quest to see how diverse and inclusive they are, the Knight Foundation and the New York University’s Stern Center for Business and Human Rights reached out to them for that data in the fall of 2021. The biggest takeaway? More than two-thirds of the 50 colleges and universities did not want to provide it.
However, the two organizations decided to release an interim report from the Knight Diversity of Asset Managers Series anyway on Thursday, showing the outcomes from the 16 that did take part, as well as all of the reasons why the other institutions did not. They are listed at the end of the report in Appendix B.
With less than 1.5% of all firms in the U.S. having diverse ownership–and 70% of all workers being women or people of color–there is concern that institutions that have been strongly pushing out DEI statements are having their assets watched by companies that may not be truly inclusive. Without that data, researchers said it is difficult to know.
“As Knight’s past research has consistently shown, a lack of transparency continues to be an enormous barrier to increasing diversity and equity in the asset management industry. You can’t improve what you don’t measure,” said Ashley Zohn, vice president of Knight’s Learning and Impact program. “We applaud our study participants for their candor and encourage other schools to provide their data for further analysis.”
The institutions that fully complied–those 12 that also agreed to independent analysis from researcher Global Economics Group–included Columbia, Duke, Michigan State, Princeton, Rice, Rutgers, Vanderbilt, the University of California, University of Chicago, University of Colorado, University of Texas and University of Illinois. The four institutions that self-reported numbers included Stanford and three Ivy League schools: Harvard, Dartmouth and Penn.
Of the group of 16 that did provide data, the one with the most diverse-owned asset management teams–both women and minority-owned–were Stanford (38%), Duke (32.1%) and Princeton (26.8%). The only other one that cracked the 25% was another self-reporter, the University of Pennsylvania. On the low end were the University of Texas system (10.4%), Michigan State (10.3%) and Rutgers (6.6%). But, as researchers pointed out, at least they were fully transparent.
“We know that a number of university leaders are working to identify and include high-performing, diverse-owned firms to manage endowment funds,” said Michael Posner, director of the NYU Stern Center for Business and Human Rights. “But the paucity of reliable data on the ownership of investment firms makes it all but impossible to accurately chart progress or to motivate reluctant schools to do more.”
The big news was the “other 34,” a group that includes several state public institutions such as Penn State and the University of Michigan, a few more Ivys and highly selective privates Caltech, Northwestern, MIT and NYU (even with its own Stern involved in the study). Their total assets comprise nearly half of the total pool from the 50 institutions. So why did they not want to take part?
Here are some of the partial responses (their full ones are in the study linked above):
Emory University: Endowments have long understood the value of diversity of asset classes in their portfolios to help portfolios weather market volatility. Many are also aware of a growing body of academic work that demonstrates the value of diversity of teams in generating smarter, more creative outcomes. The implication within asset management is that investment teams that are diverse in background, gender and ethnicity also offer opportunities to generate better investment outcomes. Emory sources investment managers globally in all asset classes first and foremost on the quality of their team and their history of execution over time.
Indiana University: Indiana University Foundation (IUF) commends the efforts of the Knight Foundation and NYU in shining a light on the unsatisfactorily low level of diverse representation in the ownership structure within the investment management industry and has followed your work and leadership in this area with great interest in recent years. Our investment consultant does a third-party calculation on behalf of IUF annually to evaluate the percentage of our portfolio managed by firms categorized as diverse and/or female-owned. We are proud to have substantially higher numbers than the industry averages.
University of Notre Dame: Notre Dame does not disclose the names of its investment partners and therefore declined to participate in the study. Notre Dame strongly supports, and is working to promote, the goals of increasing diversity, equity and inclusion in the asset management industry. Notre Dame’s Investment Office works hard to find skilled firms to execute our investment strategy. As part of that search and diligence process, we have been very welcoming of minority- and women-owned firms. A broad mix of asset managers from around the globe have been retained by the University, including firms that are owned by women and minorities.
Johns Hopkins University: “While the JHU Investment Office declined to participate in this study due to our inability to share investment names and proprietary information regarding our investment managers, we applaud the Knight Foundation for its important work around diversity in the investment industry. JHU will continue to support similar efforts alongside our peers and industry leaders.”
University of Kansas: “KU Endowment applauds the Knight Foundation and NYU’s CBHR for undertaking this survey, and eagerly looks forward to reviewing the results. As the independent foundation that works on behalf of the University of Kansas, we recognize the importance of having investment managers from all backgrounds. We internally benchmark investment managers on a range of issues, including their teams’ diversity by gender and ethnicity, the utilization of ESG factors, and membership in the United Nations’ Principles on Responsible Investing. This survey will hopefully provide a richer dataset for these benchmarking efforts.”
The Knight Foundation and Stern Center said they would seek to include “broader findings’” in the future while hoping to see more selections of diverse companies. Higher education also can be a driver of change within the industry.
“Asset management firms can offer important job opportunities for college graduates, so it makes sense for colleges and universities to invest with firms that reflect the diversity of their students and alumni,” said Juan Martinez, Knight’s chief financial officer. “But without better data, we cannot assess how well asset management firms are actually tapping into underutilized pipelines for promising talent in finance.”