ARLINGTON, Va., Oct. 26, 2020 (GLOBE NEWSWIRE) -- Progress on diversity across the whole investment industry has remained disappointingly slow, according to research from Willis Towers Watson (NASDAQ: WLTW). In its paper, “Diversity in the Asset Management Industry,” the company sets out a clear action plan to accelerate the pace of change, which it believes will lead to better investment outcomes, including specific actions for its own business.
Focusing on data-driven measurement and engagement, the paper outlines Willis Towers Watson’s updated methodology for assessing and encouraging diversity within asset managers, investment consultants and asset owners.
This approach leverages insights gleaned from new research into inclusion and diversity (I&D) issues at asset management firms, including demographic information collected at both a firm and product level. This data-led process goes beyond a reliance on a single metric, such as minority or female ownership, and instead uses a new more broadly based Willis Towers Watson Diversity Score to establish a baseline view on gender and ethnic diversity. This is supplemented with the more nuanced aspects of diversity gleaned through its qualitative manager research process.
Willis Towers Watson has also established clear actions to encourage the use of a more diverse set of asset managers in its clients’ portfolios, with an expectation that these measures will improve end-saver outcomes. Its manager research team has targeted an increase of 20% in discovery meetings with firms that have a diverse investment team, to identify new, best in class asset managers. It also expects to increase its allocation to diverse investment teams within its delegated portfolios, as it believes this will lead to better investment outcomes allowing for risk.
Willis Towers Watson is making a call to action across asset managers, investment consultants and discretionary investment solution providers and asset owners to support progress in diversity. The company is encouraging:
- Greater transparency and disclosure: high-level statistics to understand how diversity is reflected across different functions
- Increased sourcing of diverse talents, e.g., through graduate and returner programs
- Measurement of diversity of asset managers that goes beyond just equity ownership
- The removal of requirements that may unwittingly exclude diverse funds/firms
- Progressive compensation structures and policies around flexible working arrangements
- Shifting away from a star portfolio manager model to a team-based investment approach, with a strong focus on ensuring decision-making teams are diverse
- Asset owners and investment consultants to establish targets for increasing the diversity in portfolios, with the associated improvement in expected performance
- A focus on internal policies, training and networks designed to increase diversity and address the challenges of racism, sexism and other unconscious biases
Willis Towers Watson is keen to engage with asset managers who are working on improving their diversity; however, asset managers who fail to encourage greater diversity or do not respond to growing asset owner expectations, may face a downgrading of their rating — a measure Willis Towers Watson has used in the past.
“Addressing the systemic issue of poor diversity in the asset management industry requires a collective effort and, in many cases, a fundamental change in mindset and culture,” said Chris Redmond, head of Manager Research, Willis Towers Watson. "Although some efforts will take time to bear fruit, as an industry we need to challenge ourselves to do more now.
"Improving diversity is key to building a stronger investment industry, and our initial findings show it is positively linked to performance outcomes. We recognize businesses are at different points in their diversity journey today, and these proposed actions are just the starting point for the industry to build. While we understand the challenges ahead, we believe by taking these steps, the investment industry can evolve in better reflecting our society and delivering better performance outcomes for savers.”
The full “Diversity in the Asset Management Industry” paper can be accessed here.
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