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Alternative and multi-asset managers behind the curve on diversity engagement

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Credit and equity managers are leading the charge in regard to the consideration of diversity metrics when researching potential investments, Redington research has found.

Almost all asset managers across all asset classes appear to be recognising the importance of diversity within their own investment teams. Yet despite this, Redington’s Sustainable Investment Survey found that most asset managers across real assets, private debt, LDI and multi-asset funds are not considering diversity metrics such as gender when researching potential investments.

Of the 112 asset managers Redington surveyed, representing over USD10 trillion in AuM, the vast majority (94 per cent) believe that diverse teams have a positive and real impact on their investment processes. No managers disagreed with the statement, with the remainder saying they ‘neither agree or disagree’.

However, when asked whether they perform diversity assessments as part of their investment due diligence, credit and equity asset managers were the only ones to have over half of respondents say they consider aspects such as race or gender.

Looking specifically at gender, 68 per cent of credit managers say they consider this, alongside 58 per cent of equity managers. This compares to 44 per cent of private debt managers, 39 per cent of multi-asset managers and only 24 per cent of real asset managers.

On average across all strategies surveyed, 50 per cent say they consider gender (compared with 47 per cent in Redington’s 2020 survey), 37 per cent race (up from 19 per cent in 2020), 38 per cent professional experience and 27 per cent age. 9 per cent of managers on average say they considered sexuality as part of the due diligence process, including 15 per cent of credit managers.

Real asset managers scored consistently low across all metrics. Alongside gender at 24 per cent, the next highest metrics being assessed were professional experience (19 per cent), education (14 per cent), age (10 per cent) and race (5 per cent).

Nick Samuels, Head of Manager Research at Redington, says this could be partly explained by the type of assets invested in by this group of managers, with the quality of the land or building likely to take precedence over people.

Redington also questioned asset managers on the diversity of their own investment teams. Though only three quarters of surveyed strategies shared the gender breakdown of their investment team, Redington found that, despite a number of firms stating they consider gender diversity as part of their investment due diligence, investment teams average 78 per cent men. In the UK, this compares to a financial and insurance services industry population of 59 per cent men.

Samuels comments: “If managers believe these areas are important to assess when looking at a new investment, why is this not also reflected within their own organisation and processes? The same can be said for the ethnic diversity of teams that include race when researching new investment opportunities.”

Only 39 per cent of surveyed strategies shared accurate ethnicity information on their investment teams. While limited, Redington said the results did not suggest as much diversity as it would have expected, with white employees making up an average of 68 per cent of investment teams.

Despite these figures, 50 per cent of surveyed managers believed that their current team represented the diversity demographics of the country and region within which their firm operates. However, when reviewed in more detail, specifically from a gender diversity perspective, Redington did not find investment teams to be representative of the core regions in which most asset managers operate. 

Sarah Miller, Vice President at Redington, comments: “It’s clear that the industry acknowledges the crucial role that diverse teams can play in being successful. Yet our research suggests that the 50 per cent of managers who believe their teams do reflect the diversity of their population  cannot provide the evidence to back it up, and that most managers have a lot more to do to genuinely deliver on this ambition. 

“Driving a more inclusive and diverse investment industry requires greater transparency, disclosure and action. This is not only required for us to evolve and progress as an industry; it’s increasingly expected of us by our clients, too.

“But change isn’t helped by managers telling a more positive story about themselves and the diversity of their teams than is warranted by the data. What’s needed is honesty about the reality of the current situation; only then can we identify and tackle issues in order to make real progress.”

Redington recognises the limitations of some data sets such as gender and ethnicity pay gap reporting, both in regard to protecting employee anonymity and in sample size. However, it believes that it can still play a role in creating a dialogue and retaining focus around these issues.

The firm says that it will continue to collect this data from its managers, while also refining how it uses this to understand whether and how progress is being made.

Samuels adds: “We continue to review and define how we assess inclusion and diversity at each stage of our manager research and selection process. From the data, we recognise that there is no short-term solution and that progress will likely be slow. A key focus for us is to engage with managers to provoke change by asking challenging questions.

“Data can only tell us part of the story, though, and it’s how we use those quantitative points of reference to engage on the input factors that can help to effectively change future outcomes. What we’re looking for are long-term commitments from managers, combined with a high level of industry collaboration.

“For example, many, if not all, firms are seeking to address the historical gender imbalance within our industry by ensuring a more balanced graduate recruitment cohort and being more thoughtful about how they retain talent. Whilst this will drive long-term change, it won’t radically improve short-term numbers. Progress will require patience.”

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