The Institutional Investing Diversity Cooperative (IIDC), a collective of some of the largest institutional investment consultants, sent a letter to SEC Chairman Gary Gensler endorsing the agency’s recommendations to promote diversity within the asset management profession.
These recommendations were made last year and promote the idea of more transparency on the part of asset managers in an ongoing effort to build diverse investment teams. But the move also requires more standardized definitions of key concepts such as what is a “diverse manager” and what diversity metrics cover.
“Given the fact our members advise on more than $43 trillion in institutional assets, it was incumbent upon us to let the SEC know that we are in full support of the recommendation to require additional diversity disclosures from asset managers and consultants alike,” commented Shelly Heier, a founder of the IIDC and president of Verus. “We agree asset owners would benefit from improved transparency on diversity statistics of registered advisors, due diligence processes such as how filters or screens are utilized in manager selection process, and information on how diverse asset managers are included in research, searches, and recommendations,” she added.
In addition to Verus, other members of the IIDC include AndCo, Aon, Callan, Cambridge Associates, LCG Associates, Meketa, Mercer, Marquette, NEPC, Russell Investments, RVK and Wilshire Associates.
In the letter sent by the consultants’ group, they said that many barriers remain for minorities and women in the industry as less than 40% of senior and executive management in the financial services industry are women and/or people of color.
For its part, the Subcommittee on Diversity and Inclusion (D&I) of the SEC Asset Management Advisory Committee (AMAC) estimates that less than 1% of the $70 trillion in global financial assets are managed by minority-owned or women-owned firms.
The disclosure requirements proposed for SEC-registered entities would improve transparency on diversity and inclusion within the asset management industry, according to the IIDC. This greater transparency in turn should lead to more informed decision making by asset owners, they say.
According to Heier, the IIDC is working to establish common definitions and has offered its assistance to the SEC.
“We are also looking to incorporate the global nature of the financial services workforce, reconciling on behalf of clients the disparate regulations around collecting and using diversity data, and ensuring both small, privately owned, and large or publicly owned firms are held accountable to promote diversity within their employee, leadership and ownership ranks,” she added.
