*Building a more representative industry*
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FIRM LEVEL
INVESTMENT TEAM
INVESTMENT STRATEGY
Asset managers are overwhelmingly positive about the impact that diverse teams have on a successful culture and effective investment strategy. And this view is consistent across different company sizes, asset classes and regions. Interestingly, asset managers headquartered in the US are slightly more positive than those in the UK (+4% for strongly agree).
We believe that diverse teams create a culture of success and improve our ability to deliver a more effective investment strategy
Our survey addressed diversity-based questions relating to leadership, culture, promotion and recruitment. Two areas that score poorly at a firm level are:
#1. The link between senior remuneration and diversity performance Despite 61% of the surveyed asset managers having set diversity targets, only half of these link KPIs to senior leadership remuneration.
#2. Engagement with socioeconomic diversity Similar to the bulk of the private sector, asset managers struggle to capture data on socioeconomic metrics: 79% of asset managers don’t track any data relating to socioeconomic factors and only 11% set targets in the area (vs. 50% for gender).
The gender pay gap (defined as the difference between the average hourly pay of men and women across an entire organisation) is one of the few diversity metrics that many governments require reporting on. As a result, we’ve been able to collect more data on gender than any other area of diversity.
In the UK, organisations with a headcount greater than 250 must report their gender pay gap on an annual basis (although we note that mandatory reporting was suspended for the 2019-2020 reporting period due to Covid-19). The gender pay gap has remained fairly consistent for asset managers over the last few years, and the latest figures still show a median pay gap of around 29%.
Gender pay gap
Mandatory gender pay gap reporting isn’t enforced in the US and, of the surveyed asset managers headquartered in the US (44%) with headcounts greater than 250, just over half voluntarily report this figure.
We’ve identified three areas where a vast majority of asset managers have made commitments:
#1. Flexible working policies The last three years have shone a light on flexible working. Organisations have been forced to invest in the technology and infrastructure required to enable employees to work remotely and at different times. As an industry, we’ve reaped the benefits of saved commuting time and recognised the importance of in-person working alongside virtual meetings. Unsurprisingly, 91% of asset managers have flexible working policies in place. Although we find it surprising that 9% of asset managers still don’t.
We offer flexible working arrangements
#2. Employee engagement Employee engagement surveys are used by HR and leadership teams to better understand the views of the broader organisation. The data collected is typically anonymous, but it can be sliced and diced to analyse specific teams, genders or ethnic groups. 73% of asset managers undertake an employee engagement survey at least once a year, and there’s a strong correlation between frequency and company size, with the percentages reversing when companies with less than 50 employees are considered.
We conducted an engagement survey last year
#3. Enhanced shared parental leave pay 61% of the surveyed asset managers provide enhanced (i.e., above statutory requirements) shared parental leave pay, with this being more common in larger organisations (250+ employees).
We provide enhanced shared parental leave pay
We expect these areas to increasingly be seen as basic requirements for leadership teams, employees and prospective employees.
Continuing the theme of rhetoric vs. reality, nearly 58% of asset managers agree or strongly agree that their investment teams represent the demographics of the areas where they operate despite only 9% of teams consisting of more than 40% women. 62% of investment teams are more than 75% male – an increase of 4% since last year. Startlingly, fewer than 7% of firms recognise their teams are unreflective of broader demographics.
Our current team represents the diversity demographics of the country and region we operate within
Gender split in investment teams
Startlingly, fewer than 7% of firms recognise their teams are unreflective of broader demographics.
*Employed, ONS as at 13th May 2022 **Total employed, US Bureau of Labor Statistics as at 2021 Disclaimer: Average of 0% for the 'any other gender' category
The common reason cited for the uneven gender split in the financial industry is the challenge of retention. However, this isn’t reflected in our survey results: on average, there was no gap in turnover in 2021 between men and women. There is, however, a gender gap in recruitment figures, with one female investment team hire for every two men. This is broadly consistent across the board, regardless of team size.
The proportion of asset managers disclosing investment team ethnicity data has fallen relative to last year (39% vs. 32%). Although we caveat that the managers who’ve responded to our survey aren’t identical year on year, which may provide a partial explanation for this.
Investment team ethnicity
Representation of Black investment professionals, in particular, continues to be notably low across investment teams. The employed population of the US* and UK** have seven times and two times more Black representation than the average investment team, respectively.
*Total employed, US Bureau of Labor Statistics as at 2021 **Employed, ONS as at 13th May 2022
The employed population of the US* and UK** have seven times and two times more Black representation than the average investment team, respectively.
c.70% of equity and fixed income asset managers consider diversity as part of their investment processes. This compares to just 27% in illiquid alternatives, which is surprisingly low (particularly relative to illiquid credit) given the nature of how illiquid alternative strategies invest – asset managers typically have majority ownership of private corporates, real estate and infrastructure assets, giving them considerable control and negotiating power within the investment process. We hope to see this figure improve.
Do you consider diversity within your investment process?
c.70% of equity and fixed income asset managers consider diversity as part of their investment processes.
Looking now at the areas of diversity that asset managers consider as part of their investment due diligence, gender appears to dominate (at an aggregate asset class level) – 80% of the surveyed asset managers who consider diversity in their investment process look at gender when assessing potential investments. The only other area at the aggregated asset class level to gain consideration from more than 50% of asset managers is ethnicity.
More than 50% of equity managers also consider age, cognition and professional backgrounds as part of their investment due diligence.
Which of the following aspects of diversity do you access when researching a potential new investment?
Of the different phases of the investment process (screening, due diligence, portfolio management, engagement and exit), the integration of diversity is most prevalent during engagement – 44% of asset managers engage on diversity. However, only 10% of strategies that engage on diversity actually integrate and report on diversity KPIs.
Do you integrate and report on diversity KPIs?
