Barriers and Optimism: Industry Leaders on Diversity in Investment Management
October 14, 2020
The barriers to greater diversity in the investment industry are significant, argued industry leaders speaking at the IAA Leadership Week Conference this month. But there’s also grounds for optimism about the future, they added, given the groundswell of support for greater diversity both within the industry and in society at large.
The conference’s Diversity, Equity, & Inclusion: An Investment Industry Imperative panel featured speakers Dana Emery, CEO, President and Director of Fixed Income at Dodge & Cox; Gilbert Garcia, Managing Partner of Garcia Hamilton & Associates; Keith Lee, President, Chief Investment Officer, and Senior Portfolio Manager at Brown Capital Management; and John Rogers, Found, Chairman, Co-Chief Executive Officer and Chief Investment Officer at Ariel Investments. The session was moderated by Wendy John, Head of Global Diversity and Inclusion at Fidelity Investments.
Dana Emery of Dodge & Cox; Gilbert Garcia of Garcia Hamilton & Associates; Keith Lee of Brown Capital Management; John Rogers of Ariel Investments; and Wendy John of Fidelity Investments
In addition to reviewing the countervailing forces propelling and preventing more diversity in the industry, the speakers discussed specific steps that asset managers can take to enhance diversity, equity and inclusion at their firms.
Barriers Past and Present
The session began with a frank discussion of the barriers that have led to the lack of diversity. “The lack of diversity in the investment industry is not new,” observed Wendy John. In John Rogers’s view, there are two reasons why things have been “so bad for so long.”
First, the economic inequality resulting from systemic racism has made it much more difficult for minority employees to generate revenue and be successful. They “don’t live next to CEOs and CFOs . . . They don’t have a network,” Rogers explained.
Bias – conscious and unconscious – is the second critical factor. People of color aren’t seen as financial executives, continued Rogers. Diversity efforts have been more likely to emphasize “supplier diversity” in support areas like janitorial services. “It’s the modern-day Jim Crow,” he noted. “Black and brown people do the catering, and the white guys get to do private equity venture capital, long-only, fixed income and the rest. That’s morally wrong.”
Gilbert Garcia and John Rogers argued that this bias is being perpetuated by key industry gatekeepers: investment consultants, foundations, endowments. Many of these organizations have not been open to recommending or hiring diverse managers, contributing to a dearth of mandates for women- and minority-owned money managers.
Optimism for the Future
Yet while the barriers remain, the future looks more promising for diversity in the industry. “I’m feeling more and more optimistic,” noted John Rogers. The groundswell of public support for greater equity is one reason for his growing optimism, as is the increasing pressure from legislators and regulators for change.
Perhaps most importantly for the investment industry, changing public opinion has made diversity “more front and center” for clients, noted Dana Emery. “We’re getting a lot more questions about our DE&I effort at Dodge & Cox,” she added. “I think that’s very encouraging.”
At the same time, explained Keith Lee, there’s a growing recognition that diversity isn’t just a moral issue, it’s a fiduciary one. “On the smart business side, it’s really simple,” noted Gilbert Garcia. “We have good people and qualified firms in the minority community.” Fiduciaries need to cast the widest net to “find alpha wherever it is,” he added.
Yet, even with all the positive trends, we still have to “put it through the hoop,” Garcia reminded the audience.
“When you see something that is not right, not just, not fair, you have a moral obligation to say something, to do something. Our children and their children will ask, ‘What did you do? What did you say?’”
Taking Action
Converting sentiment into results will require effort, but the panelists provided a roadmap for action. As John Rogers explained, public policy changes – especially those that address economic inequality – will play a critical role. “If we don’t have a strong black and brown business community that’s going to nurture talent, be involved in the community, and be a role model, you’re not going to get anywhere.”
Yet the panelists also discussed concrete steps that asset managers can take today to foster diversity at their firms.
Be honest and open. Start by recognizing the need for change and the history and the ongoing practices that inhibit change, stressed Keith Lee. “It’s hard to move forward without addressing those,” he added. “An honest assessment of where you are with minorities and women in key positions” is also essential, noted Gilbert Garcia.
Be intentional. At the same time, recognize that diversity doesn’t just happen. “It’s about the head of the organization setting the expectation in the culture, that we’re not going to just try this, this is what we’re going to do, and then to do it,” explained Keith Lee.
Involve everyone. But while tone at the top is essential, firms need to make it clear that “we are together creating a diverse environment,” noted Dana Emery. “Everyone is accountable,” added Wendy John.
Create a structure. Firms that are intentional about increasing diversity should have objectives, policies, procedures and internal structure that support progress toward that goal. For example, Dodge & Cox has a DE&I committee that makes an annual report to the board, explained Emery.
Develop a talent pipeline. “Traditional recruiting methods don’t reach diverse candidates,” noted Wendy John. All of the speakers gave examples of the success that their firms have had success in recruiting diverse candidates by partnering with local schools and with colleges and university.
Create an inclusive environment. Make it clear to diverse employees that “their contribution is just as good as anyone else’s,” stressed Keith Lee. Dana Emery discussed how mentorship, both inside and outside the firm, can play a critical role in helping staff members feel included.
Speak out! “Apathy in this regard really hurts the organization,” stressed Keith Lee. “The more we shine the light, the more it will change,” added Gilbert Garcia, who noted that the late John Lewis said it eloquently:
“When you see something that is not right, not just, not fair, you have a moral obligation to say something, to do something. Our children and their children will ask, ‘What did you do? What did you say?’”
TAGS: Takeaways, Columns, Diversity & Inclusion, Human Resources, Leadership Conference, Business Operations