Firms owned by women and/or minorities manage just 1.3 percent of the $69 trillion under management by the asset management industry even though they perform just as well as — or better than — firms majority-owned by males and/or whites, a report from the John S. and James L. Knight Foundation and Bella Private Markets finds.
The study, 2018 Diverse Asset Management Firm Assessment (105 pages, PDF), analyzed trends in the ownership of asset management firms in four asset classes — mutual funds, hedge funds, private equity, and real estate — and found that women and minorities continue to be dramatically underrepresented among the ownership ranks of such firms. At the same time, an analysis of the firms' performance found no significant difference between those with substantial — defined as 25 percent to 49 percent — or majority women or minority ownership and those with non-diverse ownership. The report also found that firms with diverse ownership were overrepresented in the top-performing quartile of mutual fund, hedge fund, and private equity managers.
According to the report, women and minorities account for 9.9 percent and 8.8 percent of the ownership of mutual fund firms and 0.8 percent and 0.4 percent of the assets under management (AUM) by such firms, even though 26 percent of women-owned firms and 29 percent of minority-owned firms rank in the top quartile of returns for mutual funds. They own 4.6 percent (women) and 8.9 percent (minorities) of hedge funds and manage 1.5 percent and 2.7 percent of the assets under management, even though 26 percent of women-owned funds and 28 percent of minority-owned funds rank in the top quartile for hedge fund returns. They own 5.2 percent (women) and 3.4 percent (minorities) of private equity firms and manage 3.9 percent and 3.8 percent of the assets under management by private equity. And they own 1.8 percent (women) and 2.2 percent (minorities) of real estate firms but manage just 0.8 percent and 1.2 percent of the assets under management by that industry. While the study found some evidence that minority-owned real estate firms underperform non-diverse-owned firms, the difference was not statistically significant when net internal rate of return was used as the performance measure.
"Institutional investors, such as pension and endowment funds, have an obligation to invest their money wisely," said Knight Foundation CFO Juan Martinez. "This can — and should — include working with women- and minority-owned and managed firms. There is no reason not to do so."
"Knight Foundation invests in opportunity, whether in our grantmaking or investments," said Knight Foundation president Alberto Ibargüen. "Investing in women- and minority-owned firms is just that, an opportunity. This research confirms our experience: Investors can work extensively with women- and minority-owned firms with no compromise on performance."