A Review of Diversity and Inclusion Performance at America’s Large Investment Firms (EventID=114307)

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On Thursday, December 09, 2021, at 10:00 p.m. (ET) Diversity and Inclusion Subcommittee Chairwoman Beatty and Ranking Member Wagner will host a virtual hearing entitled, “A Review of Diversity and Inclusion Performance at America’s Large Investment Firms."

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Witnesses for this one-panel hearing will be:

• Michelle Gadsden-Williams, Managing Director, Human Resources, Global Head of Diversity, Equity and Inclusion, BlackRock

• Eric Pan, President and CEO, Investment Company Institute

• Ron Parker, President and CEO, National Association of Securities Professionals (NASP)

• Cyrus Taraporevala, President and CEO, State Street Global Advisors

• Michael Clements, Director, Financial Markets and Community Investment, Government Accountability Office


Background

This hearing will review the findings and recommendations of a report prepared by the Majority staff of the Committee on Financial Services entitled, “Diversity and Inclusion: Holding America’s Largest Investment Firms Accountable.” Investment firms provide a wide array of services, and among them is the management of assets. Investment managers collectively handle trillions in assets, including the investment savings of nearly half of all U.S. households.1 People saving for retirement, education, or to buy a home often rely on the professional services of asset managers for advice and guidance to help secure their financial future or meet their investing goals. In 2021, the global asset management industry managed over $100 trillion in assets.

Despite the increasing diversity of the U.S. population, studies have shown that investment firms are among the least diverse within the financial services industry, which generally struggles with diversity. According to the 2020 Census, the United States is now 38.4% people of color and 61.6% White; and women account for 50.8% of the population. Research suggests that by 2045, the United States will be majority people of color. Comparatively, an analysis performed by the Knight Foundation found that White men managed a stunning 98.7% of the assets in the U.S. investment management sector (i.e., hedge funds, mutual funds, real estate funds, and private equity funds) in 2019.

Committee Staff Report on Asset Management

To provide a deeper understanding of the diversity issues within the investment management industry, Chairwoman Waters, and Diversity and Inclusion Subcommittee Chair Joyce Beatty sent a letter to America’s 31 largest investment managers, which are those with $400 billion in assets under management (AUM) or greater.8 Twenty-eight of the firms that received this letter responded. Among those who responded, some did not fully respond to each question posed. The letter requested diversity data for five years, from CY 2016 to 2020, including demographic data on its board, staff, and executive leadership. The letter also requested information on procurement, internal policies, and practices meant to support greater diversity and inclusion and challenges in pursuing diversity and inclusion in this industry. Topics included in the request included the following:
1. Workforce diversity
2. Board diversity
3. Procurement/supplier diversity
4. Asset management diversity
5. Underwriting diversity
6. Data reliability
7. Institution’s diversity policies and practices

Report Findings

The key findings from Committee Staff are as follows:

1. Workforce Diversity
o Different racial and ethnic groups experience different levels of representation. Across all employees who are people of color, Black and Latinx employees were highly represented in administrative support roles or other non-professional level roles but were less likely to be represented in executive/senior level or mid-level manager roles. Meanwhile, Asian Americans were most represented in technician, professional, and first/mid-level manager role, compared to support roles and senior level roles.
o Women are underrepresented in executive level management (27.5%).
o People of color are underrepresented in executive level management (17.3%).
o Of the firms that made 2020 racial justice commitments, five firms committed to diversifying their work force.
o The Chief Executive Officers (CEOs) of the 31 firms included in this report are overwhelmingly White and male. Of the firms profiled, only one has a person of color as the CEO and three firms have White women as their CEOs.

2. Board Diversity

o Women are underrepresented on investment firm boards (28%)...

Hearing page: https://financialservices.house.gov/events/eventsingle.aspx?EventID=408706
Category
Management
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