Investment Manager Diversity: Widening the circle, deepening the engagement

Bert Feuss
Bert Feuss

Four years ago, SVCF made it a priority to engage more people of color and women investment managers across our portfolios. Today, we are pleased to share progress towards that goal in the recently released Investment Manager Diversity Report.

We made investment manager diversity a priority because diversity wasn’t happening on its own. Our staff members were diverse, our grantees were diverse, our board and investment committee were diverse, but not our investment managers. We lacked diversity across our portfolios despite the fact that diversity and inclusion are core values deeply embedded throughout the organization, and despite the fact that we and our investment consultant believe that smaller, skilled managers with a differentiated point of view will out-perform their peers.  

“What did we do?” “How did we do it?” and “Where are we going?” are questions I’m frequently asked, and will touch on here. But what I find more interesting is the list of real and perceived barriers to taking action that every organization must confront if they are sincere in their desire to engage more people of color and women among their investment professionals. 

To successfully tackle any organizational goal, one needs senior leadership to make it a priority, a clear picture of both the current state and desired future state, and assigned accountability for results. At SVCF, our CEO, Dr. Emmett Carson, is the champion and our investment consultant and SVCF’s staff are held accountable for reporting results. However, to be successful one also needs an organizational culture that supports and encourages diversity and inclusion. At SVCF, we begin every all-staff meeting by asking staff, “Who has done what to ‘widen the circle and deepen the engagement’?”  This mantra perfectly captures what we did, how we did it, and where we are going.  

Initially, our CEO discussed the importance of diversity and inclusion with the board and investment committee, asked the consultant to define the current state, and held the consultant and foundation staff accountable for reporting year-over-year metrics to the investment committee. Shortly thereafter, our CEO co-authored a case study titled “The Hardest Taboo to Break,” which examines how SVCF approached the issue of increasing investment manager diversity with our investment consultant, Colonial Consulting.

Each year, we require our investment consultant to report on three key metrics:

  1. The number of diverse managers their firm has met with during the year
  2. The number of diverse managers they have recommended to all their clients
  3. The number of diverse managers hired across all their clients. We also track the number of diverse managers recommended and hired by SVCF.  

By monitoring these metrics over time, we expect to see where barriers to sourcing, selecting and hiring diverse managers may be occurring. If all foundations and endowed institutions were to require this level of transparency from their investment advisors, we could collectively begin to see and address institutionalized race and gender biases across the field. 

Our end goal is not defined by a number of managers nor a quantity of assets. Rather, it will be the product of two outcomes: evidence over time that the sourcing and selection of managers is truly inclusive, and confidence that qualified investment professionals who happen to be people of color or women are not excluded due to overt or hidden biases. 

We realize this is a journey that will unfold over time. It is not a one-time goal to report to the board and then mark as complete. By taking the long view, SVCF and consultant staff were allowed needed time to meet other like-minded investors, identify best practices, attend conferences, expand manager outreach, make new connections, conduct manager due diligence, adjust priorities and internal practices, address staff biases, and modify reporting systems.

More importantly, we have incorporated inclusive practices as part of our daily routine. Now we ask all managers about diversity within their firms, regardless of their ethnic backgrounds, investment strategies or ownership structures. We regularly discuss new managers and share news of upcoming events with our consultant and investment committee. We budget to attend diverse manager conferences and expect our consultant to do the same.  

As the circle widens and the engagement deepens, so has the quality of introductions to high-performing diverse managers. We continue to direct all managers to our consultant for due diligence, and we continue to require that the same level of rigor and high standards apply to all managers.  

We are pleased with the progress we’ve made in partnership with our consultant, but we know there is more to do. We invite you to learn more through the resources listed below, and encourage all foundations to join us by supporting The Association of Black Foundation Executives' Investment Manager Diversity Pledge.

Manager Diversity Resources