Representation in asset management: Demand for minority- and women-owned firms
6 July 2020
eVestment Advantage provides transparency into how often managers are viewed, screened, charted and analyzed by consultants and institutional investors. This screening or viewership activity is an important early indicator of asset movement in the future. eVestment Market Lens aggregates thousands of documents sourced from plans in the U.S., Canada and the U.K., ranging from asset allocation studies to program reviews and manager evaluations.

We have previously examined the mix of asset management firms with minority and women owners and the supply of minority- and women-owned firms. In this post, we take a look at investor demand for investment management services from minority- and women-owned firms.

One way eVestment clients sift through our database of over 25,000 strategies is by using our screening tool, drilling down to their preferred set of investment options by establishing a set of criteria. The chart below tracks how often firm ownership diversity fields, such as the percentage of firm equity owned by women, are used to screen products by our investor and consultant clients.

First, we see that firm ownership diversity accounts for a not insignificant portion of all screens, averaging 2.9% across the full period. To establish a point of reference, performance metrics accounted for roughly 9% of all screens in 2019.

Second, diversity screening has increased fairly steadily from mid-2018 and did not decline even with the onset of COVID-19 when investors were investing more time in manager monitoring and managing risk.

Firm Ownership Diversity Screening Activity in the U.S.

Source: eVestment Advantage. Data shown as a percentage of all U.S. investor and consultant screens, trailing 12 months, as of 24 June 2020.

Consultants have really accounted for the lion’s share of firm ownership diversity screening overall, with 59% of such screens in 2016 and increasing monotonically to 87% in 2019. We saw a minor decrease to 86% YTD 2020.

Share of Firm Ownership Diversity Screening

Source: eVestment Advantage

Public pensions and managers of managers led in terms of the amount of diversity screening across our investor clients.

Given public pensions’ relative interest in diverse firm ownership, we looked at the number of public plan documents containing relevant keywords such as diversity, minority and women, by date of publication. These documents range from proxy voting policy to portfolio diversity reviews to RFPs specifically addressed toward minority- and women-owned firms.

We see a clear rise of such documents, doubling from 2016 levels. Although these documents originated from hundreds of public pensions, we do note that some plans contributed more than others. Plans in Illinois, which are required to set diversity goals, accounted for a sizeable portion of all such documents.

Public Plan Documents with Diversity Keywords

Source: eVestment Market Lens

While not all of these documents signal increased demand for investment management services from minority- and women-owned firms, we do not find it a stretch of the imagination to interpret the proliferation of documents, and discussions, to mean that diversity is increasingly on public plans’ radars.

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