Friday, October 4, 2019 8:00 AM -…
On May 24, Nat Kellogg, director of manager search, was quoted in a FundFire article on an emerging managers merger, and diverse managers more specifically. More institutional clients want to include diverse managers as part of investment manager searches. As Nat pointed out, the term “diverse managers” is commonly used to differentiate firms owned by women and minorities from the broader category of “emerging managers,” which refers to manager start-ups overall, regardless of ownership.
“There is an increase in interest from Taft-Hartley clients who say our membership looks more and more diverse and we want our investment managers to reflect that, but also the endowment and foundation clients,” Nat said. This is especially true of endowments and foundations that have built out a focus on environmental, social and governance (ESG) investing.
According to eVestment data used by Marquette, around 225 asset managers in the U.S. are listed as women- and minority-owned businesses. As FundFire highlighted, Marquette hosts an annual outreach event and has an open-door policy with diverse managers — in addition to providing feedback to firms who fail to win a mandate.
“One challenge we’ve seen in the space is a lot of groups out there have built a business around U.S. active equities which have faced headwinds from passive management,” Nat said. “We’ve suggested to folks to move away from U.S. large-cap active equities and to do more fixed income, international and small-cap strategies — areas where we still see institutional activity for active management.”
FundFire also covered Marquette’s perspective on the growing use of emerging and diverse managers by endowments and foundations — and manager challenges in connecting with them — in an article last year. Investment consultant Kweku Obed commented that these institutions are a logical next step for emerging managers, as most of their business comes from public funds and they’ve had success there. The article echoed points Kweku made in a recently published newsletter that addressed challenges and opportunities diverse managers face engaging with the broader institutional investor community.
Many diverse managers don’t have the marketing bandwidth to reach the right institutions. The solution often lies with plan sponsors and the investment manager search functions of investment consultants. The July 2017 Investment Perspectives newsletter, Don’t You Know, We’re Talking About An Evolution?, contributed to the institutional investor community conversation on the measurable benefits of incorporating diverse investment firms by exploring solutions to some of these top challenges.
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