Asset management teams with higher levels of diversity have greater investment performance, according to research.
This is stated by empirical statistics from the recently published WTW Diversity Index which corroborate this conclusion.
WTW (NASDAQ: WTW) offers data-driven, insight-led solutions in people, risk, and capital. By using the global perspective and local experience of colleagues serving 140 countries and markets, WTW helps organisations define their strategy, strengthen organisational resilience, engage their employees, and maximise performance.
In the company’s most recent document, Diversity in the Asset Management Industry: On the Right Track but at the Wrong Pace, data reveals that investment teams with the highest gender diversity exceed those with the lowest by 45 basis points annually in terms of net excess returns.
The substantial variety data has also been split by asset class, collected from over 1,500 investment methods. Equity and credit have gender diversity premiums of 46 basis points and 14 basis points, according to the statistics.
WTW will produce the WTW Diversity Index in future years, allowing an investment strategy to assess and compare its diversity to peers as well as estimate its desired diversity level.
This index will provide fresh insights into diversity statistics. WTW will be able to track the diversity premium with even greater precision in the future as a result of this.
Further DEI (Diversity, Equality, and Inclusion) data acquired this year from over 400 asset management firms finds that just 42% of asset managers responding have any success criteria in their DEI strategy, and almost half (49%) have no focused activities to attract more senior diverse talent.
Although the industry has traditionally focused on gender and ethnicity, the two most underrepresented groups in numbers, WTW is urging all businesses to broaden data collection to include other innate and acquired diversity attributes such as disability, sexual orientation, socioeconomic diversity, and neurodiversity.
Chris Redmond, head of manager research at WTW, says: “There has undoubtedly been progress made on diversity by many asset managers in recent years, but the fact is that the pace of change at an industry level is still slow and disappointing. We are hopeful that the truly extraordinary investment performance benefits linked to superior diversity can serve as a catalyst for acceleration. That is why we believe it is crucial to analyse the data on an ongoing basis to track where we are as an industry and to stimulate conversations.”
Meanwhile, the WTW analysis found no link between increased diversity in ownership or senior leadership and organisational size. This suggests that, while larger organisations may recruit more specialised personnel and adopt more DEI policies and programmes, this does not automatically result in greater overall diversity.
Paula Robinson, Director, US equity manager research at WTW, adds: “We have integrated DEI across our research and portfolio management processes, compelling us to engage with asset managers to improve and share best practice. We have also built out a comprehensive DEI reporting toolkit for asset owners to set out, and set off, on their own DEI journey. The long-term success of DEI requires asset managers, investment consultants and asset owners to collectively commit to change.”