Victoria Tellez is an Associate Director, and Jessica Pollock is a Research Associate at FCLTGlobal. This post is based on their FCLTGlobal memorandum. Related research from the Program on Corporate Governance includes Politics and Gender in the Executive Suite (discussed on the Forum here) by Alma Cohen, Moshe Hazan, and David Weiss; Duty and Diversity (discussed on the Forum here) by Chris Brummer and Leo E. Strine, Jr.; and Will Nasdaq’s Diversity Rules Harm Investors? (discussed on the Forum here) by Jesse M. Fried.
Asset owners, such as pension plans, sovereign wealth funds, and endowments and foundations, typically allocate their investments to asset managers based on expected performance, risk, and other key characteristics. In building a portfolio, they try to diversify key risks over time horizons that align with their objectives.
While not a guaranteed formula for success, evidence indicates that diverse teams can improve long-term value creation by improving decision-making and incorporating a range of perspectives, skills, and abilities. However, an examination of investment decision-makers handling institutional assets under management (AUM) in the US reveals a significant lack of diversity in demographics. Asset management firms owned by white males oversee 98.6 percent of AUM across different asset classes, while minority-owned firms account for less than 2 percent of the total AUM. The notion that the best managers are overwhelmingly white males, who make up at most 30 percent of the US population, defies logic, highlighting substantial untapped potential.
While the underrepresentation of diverse professionals in the global asset management industry is widely acknowledged, the AUM gap is particularly wide. As an illustration, FCLTGlobal’s analysis reveals that the 25 most common male names globally are associated with overseeing more than 11 times the assets under management compared to their female counterparts.