The Kresge Foundation Committed to Becoming More Diverse. Four Years Later, This Is What It Looks Like.

Although the foundation is on track to hit its 2025 goals, there is still work to do, CIO John Barker said.

Illustration by II

Illustration by II

In the four years since the Kresge Foundation launched its DEI improvement plan, the organization has increased the number of diverse-owned managers in its portfolio and added diverse team members. But according to chief investment officer John Barker, the $4 billion Detroit-based foundation still has work to do.

At the time of the launch, the foundation had committed to ensuring that by 2025, 25 percent of its assets under management would be allocated to diverse-owned funds. Kresge now has 21 percent with diverse-owned funds.

“When you look at the data, you’ll find that diverse teams make better decisions,” Barker said. He recalled that early in Kresge’s research on diversity, he found a Wall Street Journal article from 1987 that covered the industry’s racial inequality. “That’s when it hit us,” he said. “This is a systemic problem [that] our industry has faced for the past 30 years, and there has been very little progress.”

The foundation decided to act.

Kresge has taken a three-pronged approach to diversity, focusing on the people on its internal team, the portfolio, and Kresge’s “pulpit” — its responsibility toward industry leadership.

In 2018, according to Barker, 71 percent of the investment team was male and 93 percent was white. After Kresge launched its DEI plan, the foundation partnered with two organizations — ModernGuild, which helps early-career professionals find roles in finance and consulting, and Girls Who Invest — to grow its talent pool. Between adding new positions and some senior-level turnover, Kresge has been able to significantly increase its team’s diversity.


Today, 54 percent of Kresge employees are male and 69 percent are white. But according to Barker, those numbers can come down even further. “We feel we still have work to do,” he said.

As for investment managers, the average philanthropic foundation invests 20.3 percent of its assets in diverse-owned firms, while the median foundation invests 19.2 percent, according to the Knight Foundation’s 2022 Diversity of Asset Managers survey.

The Knight Foundation — and Kresge — define “diverse-owned” as an investment manager in which a diverse person (including women and people who are racial or ethnic minorities) owns more than 50 percent of the firm’s equity. This is relatively stringent as far as diversity definitions go these days. Some consultants use a 25 percent ownership metric, while others increase the metric to 33 percent.

“We actually just talked to our committee about this at the beginning of the month,” Barker said. “We wanted to affirm that this is the right way to go about it.”

Kresge ranks slightly above average when it comes to diverse-owned firms — as of December 31, 21.1 percent of its assets were managed by diverse firms. This is a 7.1 percent increase over 2018, when Kresge’s “25 by 25” plan began in earnest. Since January 1 of that year, Kresge has hired 10 new diverse managers and, in the normal course of business, terminated three.

Barker said that Kresge “has visibility” to get to 24 percent of its assets managed by diverse-owned funds over the next 18 months, and he believes that the foundation should reach its 25 percent target by 2025. This will require deploying roughly $118 million to diverse-owned funds during that time.

“We never want to lose sight of the fact that even if 25 percent or 30 percent of our assets are managed by diverse U.S. firms, there’s still 75 percent managed by non-diverse individuals,” Barker said.

Because Kresge, like many endowments and foundations, is overweight to venture capital, the foundation will likely look to other asset classes to find diverse managers. Lately, the organization has placed a lot of focus on buyout, real estate, and long-short equity hedge funds, Barker said.

Since launching the 25 by 25 plan, Kresge has shifted the way it finds investment managers. According to Barker, Kresge’s team used to source investments the way many other foundations did: By talking with peers in their network. But many of those peers were “overwhelmingly” white and male.

The other area of sourcing was through spinouts of current funds. Similarly, those spinouts tended to be led by white men. “We had to change how we sourced investments,” Barker said. “We started to go to a lot more conferences and [to expand] our traditional sourcing network.”

Kresge is now more actively engaged with the community, with many of its executives attending and speaking at events geared to diversity. The foundation has also started to ask managers for data on diversity, and it has partnered with consulting firm Lenox Park and a fellow allocator, the MacArthur Foundation, to standardize a manager demographic survey.

“Now [that] we have a baseline of data, we can talk with our managers about how we can help and what we have learned,” Barker said.

He added that while participation in the survey has been lower than desired, Kresge hopes to see it grow. “We’d love to get to a point in the industry where everyone is freely sharing this information,” he said. “This is something we hope changes.”