New report seeks to bolster opportunities for diverse-owned asset management firms

The report outlines investment consultants’ role in improving inclusion for diverse managers

Financial services firm Wilshire Advisors LLC has released a report outlining the 2020 results of its ongoing Diverse Owned Manager Initiative, highlighting the progress made and improvement needed to increase opportunities for diverse-owned asset management firms.

The report forms part of Wilshire’s “continued effort to create opportunities for diverse-owned asset management firms.” In terms of the progress made, across all manager searches supported by Wilshire from 2018 – 2020, the total number awarded to diverse-owned firms grew from 10% in 2018 to 13% in 2019 and 18% in 2020, meaning it nearly doubled during this short time.

In 2020, 44 searches were conducted, of which 20 included a diverse-owned manager, resulting in eight diverse-owned manager mandate wins. Wilshire also found that when diverse-owned managers are included in the search, the mandate win accelerates (22.2%, 26.7%, and 40.0% in 2018, 2019, and 2020, respectively).

To promote access for diverse managers, Wilshire uses their software application, Wilshire Compass, which offers “opportunities for inclusion within the Wilshire Investment Database.” In their database, Wilshire’s diverse manager committee has identified 144 viable diverse-owned firms, which is up from 134 in 2018.

In 2020, 34.7% of Wilshire’s discretionary and non-discretionary client base placed assets with diverse-owned managers, which is a marked improvement from 22.7% and 19.8% in 2019 and 2018, respectively.

Furthermore, diverse-owned firms represent 9.9% of Wilshire’s database and manage 1.7% of Wilshire’s assets versus the industry average of 1.3%.

Despite the interest in diverse-owned managers remaining high, the number of clients investing with diverse-owned managers and the assets under management by diverse firms remains low. The percentage of Wilshire’s client assets invested with diverse-owned firms has declined from 2.3% of assets in 2018 to 1.8% of assets in 2019 to 1.7% of assets in 2020. While this remains above the industry average of 1.3%, this shows that “decision-makers need to be engaging more with diverse-owned firms”, where Wilshire is “continuing to educate stakeholders about the value proposition of working with diverse managers.”

Wilshire has outlined some key takeaways to help elevate the platform of diverse-owned managers.

  • Accountability is paramount to progress. Investment decision makers and the clients they support should hold themselves accountable by closely tracking changes year over year. Just as data drives investment decisions, it should influence how programmes are run.
  • Transparency drives improved results. Regardless of a mandate outcome, diverse managers should receive transparent feedback. This exchange of information allows for growth and a more balanced playing field when the next opportunity arises.
  • A commitment to engagement creates opportunity. The best way to forge deeper relationships, understand diverse managers’ strengths and create the right opportunities for them to succeed is to meaningfully engage them in dialogue. When the national lockdown impacted Wilshire’s annual in-person meetings with diverse owners, the firm pivoted to virtual engagements. This created stronger connections and allowed consultants to meet with more managers than any prior year.
  • Incentives work. In an environment where competition for hours and attention is high, incentivising teams to make meaningful connections with diverse owned asset managers is extremely effective in driving change.

Jason Schwarz, President and Chief Operating Officer of Wilshire, said: “We established this initiative in 2018 when it was already clear the financial services industry had room for improvement in terms of diversity, equity, and inclusion. In 2020, awareness of this issue was amplified and deepened. This annual reporting initiative is one way we hold ourselves accountable for helping progress opportunities for asset management firms owned by diverse professionals. We are eager to share what we’ve learned to help push ourselves and the industry toward greater progress.

“While Wilshire continues to improve in its efforts to elevate the platform of diverse-owned managers, there is more work to be done. With an industry average of only 1.3% of assets managed by diverse managers, we have an opportunity here to continue going above and beyond to help managers increase their assets under management. Wilshire is committed to continuing raising the profile of diverse managers, highlighting diversity and inclusion in the investment community, and most importantly, exposing clients to that diversity.”

To read the report in full, click here.
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