Manager Diversity Is Increasingly Important for University Endowments. How They Measure It Is Still Unclear.

According to one insider, endowments agreeing to provide Congress information on the diversity of their managers is a big deal.

The Massachusetts Institute of Technology campus. (Adam Glanzman/Bloomberg)

The Massachusetts Institute of Technology campus.

(Adam Glanzman/Bloomberg)

University endowments are paying increasing attention to diversity at their asset managers. But how they measure diversity and plan to track it in the future remains an open question.

In July, Congressmen Emanuel Cleaver II, D-MO, and Joseph Kennedy III, D-MA, asked 25 colleges and universities about for information on the involvement of women- and minority-owned asset managers in their portfolios.

The two released a report Thursday showing that 24 of those endowments provided information — only the University of Notre Dame declined. This in and of itself is a big deal, according to Robert Raben, the founder of the Diverse Asset Managers Initiative.

“Universities have been intractable,” Raben said. “They had absolutely refused to participate. This is a watershed moment. They’re all now on notice that people are watching.”

Some of the information obtained by Congress has not been made public, and both Representatives declined to comment. However, according to the report, 20 of the respondents provided an analysis or estimate of the total assets under management they have allocated to diverse-owned or led firms. Those estimations ranged between 5.1 percent to 35 percent.


The endowments surveyed shared specifics on what, exactly, their diversity initiatives looked like.

The University of Chicago, for example, reported that by June 2020, it had allocated $1.4 billion to 25 diverse managers. Cornell University, meanwhile, is surveying its managers to learn more about the diversity of their leadership and employees. And the University of California is now required by state law to create an annual report on its diversity strategy, the report said.

Only three of the responding firms provided specific targets or projections for their future allocations to diverse firms, the report showed.

This, coupled with a lack of clarity surrounding how the endowments measured, raises follow up questions. What methods are endowments using to evaluate diversity? Do they have measurable targets for allocations to diverse managers?

Raben said he believes the industry is still on the first step in the process — recognizing that choosing women and people of color to manage their investments is a value-add.

“When we have a critical mass of institutions that are clamoring for women and people of color, then we can have a conversation about splitting hairs on diversity,” he said. “This is a crucial first public step. It raises 75 good questions, but all of those will be answered.”

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Anecdotally, the number of institutions interested in diversity is ramping up. According to Brad Alford, founder of search consulting firm Alpha Capital Management, the institutions he works with are increasingly asking about diversity during search processes.

“It’s like ESG two years ago, where it was really just ramping up,” Alford said. But, he added, that’s a double-edged sword. As they did with ESG, companies are forming diversity committees, which may not be as effective as what allocators are looking for.

“No one cares about committees,” Alford said of his search clients. “Those are just lip service. They care about ownership. It’s incredibly important right now, and I think that’s great.”