Black Asset Management Firms Struggling To Get Their Seat At The Table

By Ryan Velez

The asset management field is a trillion-dollar industry, with people both at the highest levels of wealth and those looking to get ahead using them to try and leverage what they have to advance.

Not to be missed are the many firms that handle these investments, but minority-owned firms aren’t reaping the benefits. A recent Black Enterprise article covers what both sides of the equation can do to further promote inclusiveness in this currently-closed setup.

A recent study from Bella Research puts this issue in stark clarity. Firms owned by minorities and women represent just 9% of the number of mutual funds, 8.8% of hedge funds, 5.9% of private equity funds, and less than 3% of real estate funds. Overall usage paints a bleaker picture: Firms owned by minorities and women manage only 1.1% of the industry’s total $71.4 trillion in assets under management. To be clear, it’s not an issue of performance with several minority-owned firms performing in the top quartile. Part of the issue stems from a lack of familiarity, according to Robert “Bob” Greene, CEO and president of the National Association of Investment Companies. If they do know some, a perception of risk may scare them away.

“It’s easier for them to stick with the household names that they’ve known for many years.” NAIC is the largest network of its kind in terms of diverse-owned and emerging manager private equity firms and hedge funds. Many of the nation’s largest institutional investors use them, including public pension plans, corporate pension plans, foundations, and endowments. Not only must they demand more diversity, they need to follow through and make sure these demands are being carried out.

According to Greene, making headway for minority-owned asset management starts with the trustees and fiduciaries of those institutional investors. “You must place a high priority and value on selecting a diverse manager,” Greene says. “If you don’t put a priority on diversity, then it’s hard to make the case.” A complete data is also needed, to allay the fears that going minority-owned may be a bigger risk in an industry where that is not encouraged. However, there are things these firms can do as well to help themselves. For example, the back office may go neglected, and this is a mistake. Juan Martinez, Knight Foundation CFO, notes that “Entrepreneurs need to understand and plan for the capital needs and management focus they will have to incur to put those systems in place before getting institutional investors on board.” Bringing on proper legal, accounting and compliance teams will go a long way in this regard.

According to Greene, making headway for minority-owned asset management starts with the trustees and fiduciaries of those institutional investors.

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