Despite no statistically significant difference in their performance, firms owned by women and minorities manage only 1.1 percent of the $71.4 trillion in assets under management in the U.S., a report commissioned by the John S. and James L. Knight Foundation finds.
The report, Diversifying Investments (full report, 85 pages, PDF; or summary, 14 pages, PDF), examined four segments of the asset management industry — mutual funds, hedge funds, private equity funds, and real estate funds — and found that women- and minority-owned firms made up from 3 percent to 9 percent of the industry and controlled just 1 percent to 5 percent of the assets under management. Despite modest increases in recent years, the lowest levels of diversity were found among real estate firms, of which just 0.7 percent and 2 percent were women- or minority-owned, followed by private equity firms, of which 1.9 percent and 3.7 percent were women- and minority-owned. The study also found that, compared with firms that are not diverse, the average woman- or minority-owned firm has proportionally more assets under management invested with them by public funds, foundations, endowments, high-net-worth individuals, and family offices.
Conducted by researchers at Harvard Business School and Bella Research, the study notes that assets managed by women- and minority-owned firms typically performed as well as those managed by non-diverse firms, with the percentage of women-owned firms in the top performance quartile in the second quarter of 2016 ranging from 24.4 percent for hedge funds and 33.3 percent for private equity firms and that of minority-owned firms in the top quartile ranging from 19.8 percent for private equity and 28.4 percent for mutual funds.
The study grew out of efforts by the Knight Foundation to diversify its endowment investments. Since it began to explore various options a decade ago, the foundation has moved $472 million of its endowment — 22 percent — to women- and minority-owned firms, with no fall off in performance. "Diverse-owned firms are underutilized by institutional investors," said Knight CFO Juan Martinez. "We made a conscious decision to change our approach — and we urge our colleagues to do the same."