Almost half of institutional investors would decline to work with a fund manager because of a lack of ethnic diversity, according to research from Reboot, a campaigning group for change to racial inequality in the workplace.
Reboot also found that a fifth of UK-based fund managers believed a lack of diversity would impact their ability to win business, and a third answering they ‘didn’t know’ if a lack of diversity would be a determining factor.
The UK was second only to the US in its belief that a lack of diversity would impact the ability to gain business.
Reboot collected data from 201 senior executives in fund management across the UK, US, and various countries in Europe who totalled $1.58trn assets under management, as well as 201 investors across Europe including pension funds, wealth managers, and insurance asset managers.
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Noreen Biddle Shah, chief marketing and communications officer at Carne Group and founder of Reboot, said: “Currently, there is no political or regulatory mandate to report on ethnicity pay gaps and many companies will not report information voluntarily. In 2020, the number of UK companies voluntarily disclosing their ethnicity pay gap was around 10%.
“That figure was significantly lower for financial services at just 4%. As an industry, we have quite a way to go. However, the direction of travel is going towards mandatory reporting, alongside growing pressure from investors over the coming years. This can only be seen as a positive step forward.”
While 47.3% of institutional investors remarked they would not decline working with a fund manager due to lack of diversity, 38.3% reported they would. On the fund manager side, 40% in the UK said the industry is doing an “excellent” job of bringing in ethnic minority talent. Reboot noted this is the highest number of any region.
Justin Oneukwusi, CIO at St James Place and co-founder of #TalkAboutBlack, said: “More needs to be done by the industry as a whole. The conversation and subsequently resources are overly focused on the recruitment rather than creating the right cultures to retain and progress talent regardless of background.
“Our data also shows that nearly one third (32.4%) of UK-based fund managers say that investors are not putting any pressure on them to be transparent and share the breakdown of their employees by ethnicity. This is where additional support from regulators and government will make a significant difference.”
Currently, 53% of institutional investors call the ethnic breakdown of a company when selecting a fund manager “quite important”, while 60% recognised the industry was committed to applying pressure for fund managers to create more diverse teams.
Helen Price, co-chair asset owner diversity charter, director of the Governance Church of England Pensions Board, said: “The Asset Owner Diversity Charter brought together asset owners and consultants to agree a consistent set of diversity metrics for collection across fund managers.
“Driving standardisation reduces the burden multiple frameworks place on companies whilst providing the necessary transparency for fund allocators to understand the diversity of the investment teams they appoint. There is definitely a good middle ground, and the Asset Owner Diversity Charter helps nudge the industry towards making high-quality disclosures to ensure we move towards greater diverse representation.”
