Institutional asset owners and managers have revamped their focus and efforts to improve diversity at their own offices and across the asset management industry at large, according to a recent report.

This renewed focus, according to the report on diversity and inclusion by Cerulli Associates and Russell Investments, has asset owners and managers formalizing their approaches and promoting diversity externally, as well as incentivizing their partners and vendors to adopt measures meant to increase diversity and inclusion.

Setting goals and dedicating resources to recruiting, hiring and retaining diverse talent are helping institutional asset owners and managers achieve desired organizational change, says the report, compiled from interviews conducted with leading institutional asset owners and asset managers between mid-July to mid-August 2021.

“Most organizations have established committees or councils that are tasked with determining the metrics through which they will promote and track diversity year-to-year,” states James Tamposi, senior analyst at Cerulli. “Recruiting and hiring is often the first place to start.”

A theme that emerged from this research was the need to search for untapped pools of diverse talent, often done by recruiting from non-traditional channels. Asset managers are widening their candidate pools by expanding their list of target universities for recruiting using “blind” hiring processes and other means.

In addition to hiring diverse talent, asset owners and managers describe the need to retain diverse talent, a challenge that becomes particularly acute in the middle of their organizational structures. “It is at this level, for roles requiring investment management experience, where the pool really narrows and firms are competing for the same limited group of candidates,” Tamposi notes.

To better retain these individuals, asset managers have created mentorship and career development programmes. Furthermore, in attempts to increase diversity in the industry at large and help solve the broader systemic issue, several participants have created programmes that seek to guide minorities toward the asset management space, aiming to grow the potential candidate pool downstream. Such programmes include mentored fellowship and financial literacy as early as elementary school.

In examining efforts to promote diversity externally, the research finds that asset owners and managers encourage business partners and vendors to adopt measures. Asset owners, for example, are increasingly issuing business-related requests for proposals that include diversity inquiries, thus incentivizing their asset management partners to self-evaluate.

As well, asset owners are employing various methods of assessing diversity at their asset management partners, including looking at diversity through the lens of ownership structure and targeting woman-owned and minority-owned businesses, or assessing diversity throughout their partners’ employee bases, an endeavour that requires a somewhat larger resource commitment.