The ‘Hidden Competitive Advantage’ That Sets Apart Consultants’ Favorite Asset Managers
A perceived commitment to diversity and inclusion is linked to a better perception overall, according to Coalition Greenwich.
Asset managers who commit to strong diversity and inclusion initiatives are better perceived overall — and may be more likely to land mandates, according to Coalition Greenwich.
The consulting and research firm found a positive correlation between an asset manager’s perceived commitment to D&I initiatives and the overall market’s perception of those managers, according to a paper by Greenwich consultant Susan Gould.
From 2018 to 2020, Coalition Greenwich asked investment consultants to evaluate and compare asset managers based on their D&I initiatives. The asset managers who respondents considered to be “D&I leaders” also scored consistently higher on other metrics, including overall quality, investment quality, service, and consultants’ confidence that the managers would deliver on expectations. D&I leaders were also more likely to appear as consultant short list recommendations and scored higher for client and non-client investor consideration and strategic advisor status.
“The analysis shows that D&I leaders scored consistently higher than the base group, indicating that a perceived dedication to diversity and inclusion can contribute to increased business opportunities and become a hidden competitive advantage for an asset manager,” Gould wrote in the paper.
D&I Leaders Are Three Times as Likely To Make Consultant Short Lists
According to Gould, consultants are more likely to recommend an asset manager to institutional allocators if they are consistently able to deliver on client expectations. Over the last three years, consultants surveyed by Coalition Greenwich have reported increasingly higher “confidence to deliver expectations” for D&I leaders compared to other managers. This “confidence difference” increased from 20 percent in 2018 to 31 percent in 2020.
Coalition Greenwich also asked consultant respondents to create a “short list” of the firms they would recommend for a manager search. In response, consultants cited the same firms they initially designated as D&I leaders three times more often than the base group, “demonstrating their preference for managers with strong diversity and inclusion profiles,” according to the paper.
“There’s huge benefits to doing diversity and inclusion just on its own,” Gould said in a phone interview with Institutional Investor. “There’s also this hidden benefit that you get — this bump — in other areas of your business, because people perceive you as doing well in one area, and it seems to be flowing into other areas as well.”
When Coalition Greenwich asked institutional investors about which asset managers they would consider hiring at that moment, the investors likewise cited D&I leaders three times more often than other asset managers.
“It was very interesting to see that the group [of D&I leaders] never changes,” Gould said. “The group was identified by investment consultants and they ended up standing out with institutional investors as well.”
Institutional investors were also asked to identify the managers they consider to be strategic advisors. In response, investors mentioned D&I leaders three times more often than the base group. The bottom line, according to Gould: “Your commitment to diversity and inclusion is only going to benefit you in even more ways than you might expect.”