How diverse are the asset management companies that manage the endowments of America’s 50 richest colleges and universities? It’s a question the Knight Foundation has tried to answer, but one that remains unclear, as 34 of the top 50 institutions are unwilling to talk about it.
The research, which examines the top 25 public universities and the top 25 private universities, provides an incomplete picture, given the disappointing participation of institutions. Four colleges self-reported data, leaving only 12 universities that provided asset manager lists to researchers.
But if an answer can be drawn from the limited data: their asset management companies are not very diversified at all.
The study, released Thursday as an interim report due to the lack of comprehensive data available, was a joint effort of the Knight Foundation and New York University’s Stern Center for Business and Human Rights. It relied on research conducted by Global Economics Group, a business management consultancy.
Unpacking the study
Among the 16 universities that participated partially or fully, there are significant differences in diversity. According to Stanford University, which provided self-reported data, 38% of its assets are managed by various companies, the highest figure of any institution in the study.
Duke University, which has fully participated by sharing its asset management listings with researchers, holds 32.1% of assets in the hands of various companies.
At the other end of the spectrum, companies owned by diverse interests manage 6.6% of Rutgers University’s assets and 10.3% of Michigan State’s.
The report includes statements from some colleges explaining their commitment to various companies. Others chose to explain why they chose not to participate; their reasons include the lack of personnel to collect the information and the inability to share proprietary information. Some did not comment.
“Diversity, equity and inclusion are core values at Stanford University. Stanford Management Company (SMC), a business unit of the University, is fully committed to Stanford’s diversity initiatives and has its own [diversity, equity and inclusion] Action plan available on its website. SMC is committed to increasing the diversity of its workforce, growing the existing diversity of the endowment portfolio, and contributing to diversity in the asset management industry,” Stanford said in a statement included in the report. Knight Foundation.
Duke did not include a statement and did not respond to a request for comment.
“At Michigan State University (MSU), we believe that diversity, equity, and inclusion should be upheld at all institutional levels,” read a statement included in the Knight Foundation report. “MSU Investment Office continuously seeks to identify a diverse pool of investment funds, but we do not select investment funds based on their identity. MSU is bound by the Michigan Constitution as amended by the passage of Proposition 2 in 2006 and affirmed by the United States Supreme Court in 2014, which prohibits public universities in Michigan from granting preferential treatment, discriminating or protect any individual or group based on classifications. in the operation of public employment, public education or public procurement. Therefore, each academic and administrative unit of MSU must adhere to these principles; MSU’s investment office is no exception. Although Proposition 2 prevents discrimination and preferential treatment, it in no way negates our ongoing and fundamental commitment to DCI.
Despite its low numbers, Rutgers highlighted the importance of DEI in its statement.
“Rutgers University is committed to building a more diverse, equitable, and inclusive environment. The university recently released its first diversity strategic plan, which identifies concrete steps to chart a more inclusive path that models excellence for the institution. Rutgers recognizes that there are many factors, including ownership, that must be considered when evaluating the diversity of our investment partners. Factors such as the makeup of executive management and people in investment decision-making positions, for example, are also critical evaluators,” Rutgers said in the report. “Our portfolio diversification improves when we take these considerations into account. An important part of advancing diversity in the investment management industry is through the recruitment, development and retention of new professionals. We monitor the diversity of our partners at all levels of their organizations to understand how they are changing over time.
A lack of transparency
Outside observers as well as those involved in the study have criticized the lack of institutional involvement, saying providing such data provides valuable investment insights.
“We know that a number of university leaders are struggling to identify and include high-performing diverse companies to manage endowment funds. But the lack of reliable data on investment firm ownership makes it nearly impossible to accurately track progress or motivate reluctant schools to do more,” said Michael Posner, director of the NYU Stern Center for Business and Human Rights. , in a press release. press release accompanying the study.
Some observers have been more pointed in their criticisms.
“While this study shows signs of progress, it also sheds light on how far we need to go. On the one hand, 34 institutions, representing $273 billion in assets, refused to participate. It is absurd that in 2022, when so many institutions have finally committed to transparency, so many schools are still refusing to release their diversity numbers,” said Robert Raben, Executive Director and founder of the Diverse Asset Managers Initiative, in a press release. dealing with the interim report.
Raben noted via email that even for colleges reporting the highest percentage of assets managed by various companies, there were still many unanswered questions. Although institutions such as Stanford and Duke have a strong representation of diversity in this area “compared to the field,” he noted that “we have no idea what is behind this number. Is it all or mostly white women? Is it LGBTQ? South Asians? We know from other sources that the number of black and Latino/a managers is extremely low, which is the main problem. So first, universities need to disaggregate the data so we can see exactly what’s going on.
Asked about colleges on the other end of the spectrum that lack representation, like Rutgers, Raben was critical.
“It’s typical and terrible,” Raben wrote. “That probably means… 93.4% of the entire staffing is run by white men. In what industry is talent almost evenly distributed only to white males? No domain, and the residual exclusions from asset management of women and people of color are costing them returns. If you’re not working with all talent, you’re missing out on returns. »
Although the Knight Foundation found limited diversity in higher education asset management, information from the National Association of College and University Business Officers offers a more positive outlook, noting that many colleges are developing policies to respond to these concerns.
“Over the past two years, we’ve seen a slight increase in college and university interest in using a variety of managers,” wrote Ken Redd, senior director of research and policy analysis at NACUBO. , in an email. “From fiscal year 2020 to 2021, the share of institutions that said they have a policy of considering hiring investment managers owned by women or people of color fell from 5.8% to 7, 7%, according to our NACUBO-TIAA endowment study (NTSE series). Growth was somewhat more noticeable in private colleges and universities, where the share with a policy of consideration for diverse businesses rose from 6.8% to 10.2%.
Long-term trends around diversity are unclear, Redd explained, since the survey question has only been included in the NACUBO-TIAA Study of Endowment series for two years.
Redd encourages institutions looking to improve diversity in asset management to engage their boards on the issue and gain buy-in, update their investment strategies to include diversity goals, and consider to call on external consultants who have a keen sense of the landscape and can identify various firms.