It’s no secret that the investment management industry has a diversity problem, on any measure – gender, ethnic heritage, cognitive diversity. But asset owners, asset managers and consultants are developing strategies to open the doors and encourage new voices and new faces to enter and thrive.
There is no one repository of figures for diversity across investment management, so stitching together the picture of the industry based on empirical evidence is a patchwork affair. But clearly, there are not enough women at any level, particularly senior management. In 2017, Mercer conducted a study in conjunction with 15 asset owners and managers, based on a survey, focus groups and interview.
Diversity was measured across gender, cultural background, age, socioeconomic background and educational qualifications. The study found that 76 per cent of investment managers are male, 48 per cent are private-school educated (compared with the national average of 35 per cent) and 76 per cent of those who completed postgraduate studies had a master’s degree in finance.
Additionally, the study found that female investment managers are up to 20 per cent less likely to be promoted through the ranks and up to 50 per cent more likely to leave than men. Women on Boards tracks board positions for various sectors, and its latest data shows that in the banking industry, women hold 172 out of 578 board positions, or 30 per cent. On superannuation boards, out of 826 trustees, 273, or 33 per cent, are women.
Cbus widens talent pool
Some asset owners and fund managers are developing practical programs to address this problem and tie increased diversity to better outcomes within their teams. Cbus Super is tending to its own management team and structuring its operations to hire, support and promote diverse talent, chief investment officer Kristian Fok says.
“There is quite a lot of empirical evidence that shows companies and asset management firms that have diversity in the workforce, in the investment settings, tend to outperform,” Fok says. “If you start with that premise, in our case as we are building out a team, then why would you not try to build something in a way that builds higher performance?”
Fok notes that more than half of his investment team has had experience working overseas, and 40 per cent speak a language other than English. Women make up more than 40 per cent of the team, and Cbus is planning to get more women into senior management positions. Additionally, Fok points out that about 20 per cent of the investment management staff have “some kind of board or board advisory experience”, and more than 10 per cent have been involved in start-up companies.
To build a more diverse team, Cbus has focused its thinking on recruitment, and flexibility of working location and working hours. The fund employs staff in Melbourne and Sydney, and works to engage its staff through technology such as videoconferencing, Fok says.
This approach creates a wider pool of talent and offers Cbus the opportunity to work out how to manage remote teams, a skill Fok thinks will be a strength if the superannuation fund ever opens overseas offices to support its direct investment scheme. “I have flexibility to offer it full-time or part time and also by location in many cases,” Fok says.
“We are careful about how we advertise, what we put in a position description. We run it through various algorithms to use gender-neutral language. Most of our recruitment is done internally. Our talent recruitment team is instructed to bring a short list of 50/50 [male and female candidates] where possible, and if not, they need a good explanation for why not.”
Some asset owners and consultants are actively addressing gender diversity through the way they participate in industry events; for example, many asset owners won’t agree to participate in a panel session unless there is gender diversity.
AustralianSuper chief executive Ian Silk is a member of the Male Champions of Change initiative, in which men have adopted such a policy. AustralianSuper confirms that on its investment team, there are 131 men, 87 women, for a roughly 60/40 split.
Overall, the fund employs 57 per cent men and 43 per cent women. A key focus of the fund’s investment department intern and graduate program is to ensure at least 50 per cent women for each intake.
“AustralianSuper has managed to meet or exceed the 50 per cent target for both intern and graduate programs over the last year and continues to develop the women we have recruited into this program over the last five years,” AustralianSuper general manager, people and culture, Margie Hill says. Some asset owners are working to address the gap more widely through the industry.
In March, HESTA – the only fund in Australia with a woman chief executive, chief investment officer and chair – announced it would survey 70 of its Australian and international investment managers about their workplace gender representation as part of a wider focus on gender diversity through its investment value chain. It’s evidence that asset owners can help push these issues in that context. The results of the survey are expected in June.
One fund manager that discloses its own statistics is Colonial First State Global Asset Management. CFSGAM has begun revealing its diversity data in its annual responsible investment and stewardship report. In the 2017 report, the business disclosed that at the firm level, 58 per cent of employees were male and 42 per cent women.
Within the operating group, it was 80 per cent men, 20 per cent women; within senior professionals, 69 per cent men, 31 per cent women; within investment management professionals, it was 78 per cent men, 22 per cent women. Client-facing professionals was where women were in the lead, with 51 per cent to 49 per cent for men. New starts in the previous 12 months were equally men and women, and new starters on investment teams in the last 12 months were 70 per cent men and 30 per cent women.
“We’ve been disclosing this for a few years; the numbers are hard to move,” said Pablo Berrutti, head of responsible investment, Asia-Pacific, at CFSGAM. “[While] there’s a determination to move them, there are systemic and market factors that make it difficult as well. The number of women who show interest in funds management as a career isn’t as high as for men. There are also other, deeper issues that [will take] a bit of time. We’re up for that challenge.”
CFSGAM has investment management operations in the UK that have adopted such policies as gender-balanced shortlists. Name-blind CVs have been piloted in parts of the business and that will be extended more widely in 2018.
The firm requires at least one woman interviewer for job interview panels, says Rebecca Antonini, head of human resources, Europe, Middle East and Africa at First State Investments, CFSGAM’s international arm.
Further initiatives at CFSGAM include: a gender-neutral parental leave program; coaching to support return to work and managing a career as a working parent; parent facilities in key locations; unconscious bias training for UK staff; and membership in industry initiatives that encourage more diverse talent to enter a career in investment management, including the Future A5SET Conference and the Investment 2020 program.
In 2017, the firm recruited two women and two men to be investment 2020 trainees as school leavers, Antonini says.
From entry to C-suite
The investment management industry has not done a good enough job of telling its story, particularly to university students, says Mercer diversity and inclusion practice leader Yolanda Beattie. In Mercer’s 2017 study referenced above, it found that less than 20 per cent of finance students aspire to work in investment management, while 41 per cent of female students and 27 per cent of male students don’t know enough about investment management.
To combat this, Beattie has developed an employee and career value proposition (EVP) program that has attracted financial support from asset owners, including AustralianSuper, and will start in July or August with Sydney University.
“The aim of the program is to increase diversity in investment management,” she says. “We’re looking at diversity in terms of cultural background, educational background and, particularly, increasing the number of women who are managing money and leading those portfolios – the portfolio managers, the CIOs, the heads of investment. Most students don’t know much about investment management.
“There’s no presence on campus, no presence in the community. Most confuse investment management with investment banking and banking more broadly. So part of the message is about what it is to be an investor and what the career pathways are, along with providing the diverse role models to help particularly women see what a career might look like.”
The first level of the program is a call to action.
“It’s clear from the research that our targets – high-achieving, talented women – want real opportunities to connect with real people in the industry and real experience and job opportunities,” Beattie explains. The second step in EVP is to address promoting and retaining women, she says.
Mercer is also working with Dr Jess Murphy to apply her ‘pathway to your potential’ program, which focuses on getting partners in investment management to focus on promotion and retention. Beattie says the investment management industry “has a great story to tell”.
She notes statistics from the study that found 88 per cent of investment managers say their work is purposeful and 92 per cent say it is interesting and engaging. The empirical data demonstrating that diverse companies perform better includes a 2015 MSCI study that found “companies that had strong female leadership generated a return on equity of 10.1 per cent per year versus 7.4 per cent for those without (on an equal-weighted basis)” and “companies lacking board diversity tend to suffer more governance-related controversies than average”.
Studies on gender diversity in investment management firms are not as conclusive.
A March 2018 Morningstar study of US investment management found that women perform equally well as men in terms of fund returns. Helga Birgden, global business leader of responsible investment for Mercer, suggests that drawing more women into the investment management industry can diversify the critical skill set.
“There is a gap in the investment industry’s take-up of women’s expertise and there is a critical role that women can play as experts in the area of sustainability and climate change, as part of money management,” Birgden says. “The lack of gender diversity in our industry reflects a lack of diversity of thinking about the complex risk landscape in which investors are operating. These issues are strategic, they are about the highest form of governance, and I really would like to see a much greater take-up of such issues at the board level.
“Women bring intellectual capital to the table that is contemporary and can help make sure investment decisions are sustainable and, therefore, strategic.”