December 17, 2020 – By Erika Seth Davies
While we launched the work with the belief in the significance of creating more equitable access to capital markets, the disproportionate impact of COVID-19 on BIPOC communities compounded by the country’s racial reckoning in the wake of the murders of George Floyd, Breonna Taylor, and Ahmaud Aubrey, dramatically amplified the urgency of this project. If nothing else, the past 6 months have revealed the system is unfortunately working as it was designed as reflected in policy and practices that create economic inequity disproportionately in communities of color.
How bad do things need to get before we aggressively make changes? The data shows us that the performance of diverse managers is just as strong as firms predominantly owned by white men. We also know that structural barriers and implicit bias mitigate opportunities for diverse firms to gain access to compete. Throughout the series of blogs and webinars, I have covered the landscape and addressed ways of taking a systemic approach to moving the needle on increasing access to capital markets for BIPOC managers.
Watch Erika’s conversation with Bert Feuss & AJ Hernandez on this issue
Now that the racism in the room is no longer hiding in plain sight, it is time to act and be accountable for shifting the policies and practices that have held an inequitable system in place for far too long.
- Be intentional about transformational change for racial equity. Taking the same approaches to decision making will result in more of the same outcomes. As an advocate for racial equity, I am pleased to work in solidarity with a group of BIPOC managers to craft and share the Due Diligence 2.0 Commitment to set new norms and challenge the oft-cited criteria and risk-assessment frameworks that keeps less than 1.5% of assets with diverse firms. To achieve a change in outcomes, decision makers in the ecosystem must be willing to make changes to their assumptions and processes for identifying, evaluating, and hiring managers.
- Seek out, engage, and invest with BIPOC managers. Diverse managers do exist with the ideas, networks, and capacity to deliver strong performance and expand the universe of investment opportunities. With the presence of affinity groups in the financial services industry as well as the recently-released Diverse Manager Directory from Emerging Manager Monthly listing over 100 firms, it is simply no longer acceptable to claim ignorance of where to find diverse firms.
- Hold every firm accountable for advancing diversity, equity,, and inclusion in the investment management industry. As recently shared in the Wall Street Journal, Yale University with one of the largest university endowments at $31B has put the asset management industry on notice that diversity in the ranks matters to performance and future opportunity with the institution. With resources like the Diversity Metric Score released by Lenox Park, there are ways of measuring the relative impact of diversity beyond firm ownership and considering the essential components of inclusion at all levels in the industry. Without large-scale commitment to increasing the presence of racial and gender diversity as a basic expectation for generating performance, simple inertia will allow the industry to continue moving under its current conditions and widen the gap between access and opportunity.
Equitable access to capital markets for diverse-owned asset management firms requires consistent, informed, and intentional decision making that must begin now. An industry that relies on hard data can no longer ignore the numbers, and must create lasting, equitable solutions for all.
Erika Seth Davies is a Fellow in Fair Finance at the Beeck Center. Follow her on Twitter