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Pictured above: Tina Byles Williams, CEO, CIO, and founder of Xponance, Inc., speaking at the 2023 Annual Investment Meeting.
“People don’t believe the data. They believe the bias,” said Robert Raben, executive director of the Diverse Asset Managers Initiative (DAMI) when asked why more institutional investors don’t invest with diverse asset managers, meaning asset managers who identify as women or people of color.
“Approximately only 2% of all assets are managed by women or people of color. It is a demand problem. It’s not a supply problem,” Raben said. In fact, a 2019 study from the Knight Foundation shows that “while philanthropy has begun to focus on this disparity, the field has a long way to go.” (Source: Knight Foundation, 2019)
The Diverse Asset Managers Initiative works to raise awareness about the benefits and opportunities of investing with diverse-owned asset management firms by sharing studies, educating, and “ultimately connecting diverse asset managers with the more traditional investing community.”
The studies they share are compelling, even if it is challenging for people to see the data and overcome their biases. Various research studies, including a report by the National Association of Investment Companies, Examining the Returns 2019, show the benefits of investing with diverse asset managers and that diversity can lead to excess returns and increase the probability of investment success.
“Approximately only 2% of all assets are managed by women or people of color. It is a demand problem. It's not a supply problem.”– Robert Raben, executive director of Diverse Asset Managers Initiative
For example, a Harvard Business School study referred to in the report by the National Association of Investment Companies found, “the probability of success (as defined by a successful exit from an investment) decreased by 17 percent if the co-investors had also been co-workers at any point in time. And successful exits decreased by 19 percent and 20 percent, respectively, if investors had attended the same undergraduate school or were the same ethnic minority. The authors of the study concluded that these decreased investing success rates were due to the fact that ‘the cost of affinity is most likely attributable to poor decision-making by high-affinity syndicates after the investment is made.’”
Additionally, a Barclays Capital report titled “Affirmative Investing: Women and Minority Owned Hedge Funds,” found that “performance, both in terms of absolute returns and risk-adjusted returns, is substantially stronger for women and minority owned hedge funds than for the hedge fund universe at large.” (source)
Despite this data, “the sexism in asset management is intergalactic,” said Raben.
Aligning asset management with mission and values
President & CEO Javier Alberto Soto has been following this trend for years and was thrilled to have an opportunity to implement these strategies at The Denver Foundation.
At the end of 2022, The Denver Foundation decided to move the entire balance of our discretionary funds — about $160 million at the time — to the Sustainable and Responsible Investment (SRI) Pool, our most mission-aligned pool. This move signals a significant commitment to aligning our assets with our mission. (Read our blog from 2023 to learn more.)
When we started the SRI Pool, none of the assets were invested with diverse asset managers. Now, more than half (52.9%) of the pool’s assets are invested with women and people of color.
One such manager is Tina Byles Williams, the founder, CEO, and CIO of Xponance, Inc. Xponance, Inc. is a $18.4 billion multiple strategy investment company, and one of the largest diverse and woman-owned investment firms in the U.S.
– Tina Byles Williams, founder, CEO, and CIO of Xponance, Inc.
While this move of the balance of our discretionary funds indicated an alignment with our mission and values, it is also smart in terms of the pool’s performance. The SRI Pool is now valued at more than $260 million. Investing with women and people of color can result in strong performance, which means that The Denver Foundation and the fundholders who join us have more money for our philanthropic giving.
According to Xponance’s Williams, “Diverse teams can bring broader views and assessments to the decision-making process, and considering we’re managing other people’s money, we owe it to them (our clients) to provide the strongest possible investment team we can. This is why [our] mission… is to generate investment excellence across a broad range of solutions (direct & passive systematic equity, fixed income, global equity multi-manager strategies, as well as private markets) generated by diverse investment teams and professionals.”
The role of leadership in shifting investment strategy
When asked why so many organizations struggle to change their investment strategy, Raben replied, “In all of our diversity work, and pardon the triteness of what I’m about to say, but the variable that matters is the commitment of the leader.”
![Robert Raben, executive director of Diverse Asset Managers Initiative](https://denverfoundation.org/wp-content/uploads/2024/08/Robert-Raben-3-1-1-251x300.png)
At The Denver Foundation, we truly have the commitment – and not just from a single leader. When Soto came to The Denver Foundation in 2019, this was a high priority for him. And he knew he couldn’t achieve this success alone. He had the support of John Loewy, who was the Board Chair at the time, and Lisa Zúñiga Ramirez, who was then the Treasurer and is now the Board Chair. Lisa is also a corporate and mutual fund director. Soto also had the support of our investment committee to start implementing this strategy. (Note: The investment committee at The Denver Foundation has a female chair and was and is comprised of a majority women. Only one investment committee member identifies as male.)
According to Raben, that makes all the difference. “The support needs to come from the top. Whether or not women are interrupted in meetings. Whether or not women are entrusted with leadership. You can do all the things and go to all the webinars, but if in your head you believe that women can’t do this as well as men, you don’t move.”
At The Denver Foundation, we’ve moved.
For Soto, this focus on investments with women and people of color reflects a smart philanthropic investment strategy in addition to a deep commitment to our mission and values.
“It’s one thing for 5% of your assets to be directed toward this mission, but by focusing on supporting diverse investment managers, we can put the full power of our assets behind our mission. This transition in our investment portfolio displays our commitment to diversity, equity, and inclusion and has been achieved without compromising our investment returns.”
If you would like to learn more about our investment strategy and SRI pool, you can visit our website denverfoundation.org/donor-services/investment-options or talk with a member of our philanthropic investment team at help@denverfoundation.org.