Accelerated dialogue on diversity to help CIOs tackling COVID uncertainty

Accelerate Investors’ CEO and Founder Betty Salanic is a leader and an advocate for accelerating historically underrepresented minorities managing institutional capital.

Salanic partners with pension funds, endowments, foundations, asset managers and other investment industry stakeholders. She is well known for her former role in conducting research and due diligence on private equity and venture capital investments for Rice University’s $6.5 billion endowment. She also raised institutional capital for Root Capital.

As the current national conversation has brought the topic of diversity to the forefront, Salanic took some time to offer her industry insights to Alternatives Watch in advance of an August 5 webinar hosted by Accelerate Investors and the National Association of Securities Professionals.

Vailakis: How has the discussion around diversity in senior alternative asset management and allocator roles shifted over the past five years?

Salanic: The conversation has stepped up. There are now more tools and studies that measure the lack of diversity in investment management. This is important; you measure what you care about.

For instance, a 2018 research report commissioned by the Knight Foundation found that in the U.S., 1.3% of capital is managed by women and minorities in the $69 trillion asset management industry.

Also, ILPA and Lenox Park Solutions have developed tools to identify diversity, equity, and inclusion at GPs. LPs can ask GPs to provide this information during their due diligence process.

Another example is the 2019 study led by Stanford University and Illumen Capital that highlighted racial bias against Black managers.

More recently and at the macro level, COVID-19 has highlighted racial wealth and health disparities in the U.S. Black and Latinx people are currently experiencing a higher unemployment rate according to the Bureau of Labor Statistics, at 16.8% and 17.6% respectively as of May vs. 12.4% for Whites. Many reports show that Black people are three times more likely to die of COVID-19 than White people.

U.S. pension funds have a large number of Black and Latinx people who pay into the pension funds, but the dollars are not necessarily invested by people who look like them, nor are the pension funds necessarily making investments that benefit these communities. And while there are some Black and Latinx investment managers, the number of such managers is not representative of our population. The U.S. population is over 30% Black and Latinx, but 30% of assets under management are not managed by Black and Latinx investment managers. Asset allocators are in a position to be catalytic; Wall Street is being called on to make positive adjustments.

Accelerate Investors is currently developing its own investment consultant survey. One thing we found is that the numbers in many reports aggregate the statistics of underrepresented groups. This lack of granularity masks the astronomical underrepresentation of Black and Latinx people. If we can better measure the gap, then we can begin to fix it. More to come on this!

Asset owners who can be instrumental in creating positive change in the industry can use these tools and information to measure progress.

Vailakis: You host a wonderful CIO podcast that showcases the investment expertise of the diverse allocator community; given your frequent conversations with public pensions and other investment professionals, what is their general sentiment and allocation behavior in the time of COVID-19?

Salanic: To provide some background, I launched the CIO Conversations Podcast to democratize access to leading chief investment officers for investment managers and also to enable younger generations to learn about investing.

Due to my work, I am in constant conversation with many asset owners and at this time many do not want to make any rash decisions. They are, for the most part, still committed to making allocations. There are certainly some asset owners that will not deploy to new managers that they have engaged with only virtually thus far. It goes without saying that it will be more challenging for all “new” managers to attract institutional allocations at this time, whether they be new to the asset owner or be emerging or first-time managers.

Vailakis: Have economic dynamics due to COVID-19/recent civil rights activity shifted the diversity conversation in asset management so far, and if it’s too early to tell, do you foresee any shifts?

Salanic: I’m so glad you asked, Accelerate Investors will in fact, host a complimentary panel discussion with senior industry leaders on August 5 to discuss this question. I’ll provide some thoughts for now but hope you and others will tune in for a more in-depth discussion!

I’m hopeful that current activity will spur meaningful, positive impact in the investment industry. An example of this is the Amy Cooper/Central Park incident. It’s worth highlighting that she worked for Franklin Templeton, an investment firm, and they took immediate action. In June New York State passed legislation that allows people “a private right of action” if they believe someone called a police officer on them because of their race, gender, nationality or other protected class.

While much of the focus in our media is on egregious acts of racism there are unfortunately, more subtle acts of racism that occur at companies on a daily basis. For example, people who are in charge of hiring, promoting, and firing sometimes hold these biases. We hope that firms increase their efforts to fix these dynamics and that governments also continue to create legislation that protects people’s rights.

We should all remember Martin Luther King, Jr.’s words in Letter from a Birmingham Jail, “Injustice anywhere is a threat to justice everywhere.” The racial wealth disparity gap that exists in the U.S. highlights the injustice faced by Black and Latinx families. Per a 2016 Federal Reserve Survey of Consumer Finances, the median White family had 10 times the wealth of a median Black family.

This is a time for real change, not just platitudes. This is an opportunity for firms to examine themselves in a manner similar to what Larry Fink of BlackRock outlined in his May letter to employees. He wrote, “We must also consider where racial disparity exists in our own organizations and not tolerate our shortcomings.”

The time has come for all leaders regardless of color to implement solutions for a truly inclusive and just society across all sectors.

Nancy Vailakis

Nancy Vailakis is a 16 year veteran of the alternative asset management industry, having held prior investor relations roles at Cerberus Capital Management and BlueMountain Capital Management. Vailakis holds an MBA in Finance from the NYU Stern School of Business.

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