Movement towards more diversity in the investment industry has so far been sluggish, consultancy Willis Towers Watson has said, noting that its research supports the idea there is a positive link between diversity at asset management firms and performance.  

In a new paper on the topic, the firm said: “I&D (inclusion and diversity) is an area where progress remains disappointingly slow for the whole investment industry; not just asset management but also other segments, including investment consulting (and hence our own organisation) too.”

WTW said it needed to improve and was committed to doing so, and also recognised the part it had to play in accelerating progress given its role as adviser or co-fiduciary to its clients.

In the research paper, entitled “Diversity in the Asset Management Industry”, the firm made a number of suggestions for action investors and asset managers could take to improve gender and ethnic diversity in the investment management industry.

On the question of whether diversity led to better returns, WTW said that at a minimum, it did not hurt returns.

“But more than this, Willis Towers Watson’s assessment of diversity and performance outcomes shows that investment teams with diversity, in particular ethnic diversity, tend to generate better excess returns,” the firm wrote in the paper.

WTW ups diversity expectations

WTW said it had established “clear actions” to encourage the use of a more diverse set of asset managers in its clients’ portfolios, and expected these measures to improve end-saver outcomes.

It said its manager research team was aiming for a 20% increase in discovery meetings (encounters with firms it does not already work with) with firms that had a diverse investment team.

WTW also said it expected to increase its allocation to diverse investment teams within its delegated portfolios, in the belief that this would lead to better investment outcomes allowing for risk.

Chris Redmond, WTW’s head of manager research, said: “Addressing the systemic issue of poor diversity in the asset management industry requires a collective effort, and in many cases a fundamental change in mindset and culture.”

WTW said its I&D approach built on a template developed by its Thinking Ahead Institute (TAI), which it said had spent many years assessing the impact of greater cognitive diversity on a team’s effectiveness.

Last year, TAI’s work informed decisions by WTW to downgrade a handful of managers because of concerns the firms were too dependent on one individual who had too much power.

 

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