Diversity Beginning To Influence Portfolio Allocation Decisions - Think Tank

In the report Diversity from an Investor's Perspective, the firm researched 100 asset owners globally with combined AUM of $8trn, while also conducting 40 interviews with a wide range of investment market participants.

It found diversity is becoming increasingly a priority for corporates with 74% mentioning diversity in their annual reports. 

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In addition, asset owners are focusing on improving diversity both internally, through their investment functions and trustee boards, and externally, by including diversity criteria in manager selection and allocating funds to target diverse groups.

Some 13% said they use diversity as a theme for portfolio allocation.

The report said: "Diversity questions are coming up more frequently in requests for proposal, there are more of them and they are more focused. Investment consultants are also

including diversity criteria.

"However, the response from asset managers is varied some are working on their diversity data while others remain reluctant to share it."

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Yasmine Chinwala, partner at New Financial and co-author of the report, said: "Our research shows asset owners have really stepped up their activities on diversity in the past couple of years, and there is greater collaboration on the topic amongst the investment community.

"It is vital we not only maintain this momentum but accelerate the pace of change - and the asset management industry is prepared to meet the challenge head on."

In addition, the research also found diversity efforts are generally initiated by individuals but these are increasingly being translated into company policies and processes - an important shift towards sustainable change, New Financial said.

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In a briefing attended by Investment Week this morning, Harriet Steel, global head of business development at Hermes Investment Management, highlighted that women control 48% of the UK's wealth and this will grow to 68% by 2025.

"If you do not think diversity is important you are ignoring a huge chunk of very valuable work and compromising your ability to deliver financial returns."

Jean-Marc Crepin, partner at Brown Brothers Harriman, added: "This industry has an image problem. We need to look like our clients and behave like our clients and understand our clients opinions.

"If you believe women will be holding the majority of wealth in years to come, we need to be creating products for them."

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Commenting on New Financial's research, Michelle Scrimgeour, CEO, EMEA at Columbia Threadneedle Investments, noted: "For meaningful change to be achieved, diversity needs to run through the entire supply chain. This report shows that asset owners are beginning to flex their muscles by asking questions and holding asset managers as well as the companies in which they invest to account."

Hermes' Steel added: "Men and women approach business differently and their collaboration can lead to more informed decisions and astute risk management.

"In fact, research has found that boards with more diverse composition also tend to be more innovative and make better decisions. Change must start within the education system and companies need to follow that with supportive policies that allow all their best talent to thrive."