A new study suggests that some investors are failing to treat diversity as an important factor in practice, when they search for external asset managers, even though they say they would be unlikely to outsource to firms that lack gender or ethnic diversity.

Investment consultancy bfinance said in a new paper entitled “Seeking diversity from investment managers” that even though around 36% of investors were polled as saying they were unlikely to hire external managers that lacked gender or ethnic diversity, the consultancy found that, as a group, their behaviour did not live up to that degree of intention when actually searching for managers.

Bfinance cited data from its November 2022 global asset owner survey as evidence for the first conclusion, with that poll also having revealed that among different types of investors, it was pension funds that came out most strongly in stating they were unlikely to pick non-diverse asset managers, with 41% of that group giving that response.

The authors of the new study – the consultancy’s senior director, equity, Martha Brindle, and Fiyin Kosoko, senior associate, ESG and responsible investment – said in their paper that since intentions and actions were not always aligned, they had sought further evidence by examining all bfinance’s manager searches carried out by the firm’s clients over the 12 months to the end of June 2024.

The pair said they had asked the lead researcher to verify whether the investor client had in fact treated diversity as a “significant” consideration, a “relevant” consideration or “irrelevant” – framing the question like that “in order to deliver a meaningful assessment, as opposed to a tick-box approach”.

In just 22% of manager searches the lead researcher reported that the investor treated diversity as a ‘significant’ or ‘relevant’ factor in their manager selection, Brindle and Kosoko said.

Bfinance said this indicated a gap between investor intentions and the practical implementation of diversity goals.

The firm said their research showed asset managers had broadly adopted diversity, equity, and inclusion (DEI) policies across both public and private markets, with 75% of firms having a standalone DEI policy and a further 7% having DEI matters addressed in their ESG policy.

On the other hand, only 38% of asset management firms reported that 30% or more of their management staff were women, the researchers said.

“Institutional investors should look beyond headline diversity features and metrics when considering asset managers,” they said, adding that a DEI policy may be a largely symbolic and superficial gesture or could feature clear measurable goals and timelines.

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