Colleges and universities could be required to report the portion of their endowment run by women- or minority-owned businesses under a new bill by U.S. Representative Emanuel Cleaver II.

Missouri Democrats Endowment Transparency Act 2022 aims to strengthen diversity and inclusion in the asset management industry by mandating transparency and standardizing data collection. The endowment assets of colleges and universities collectively total more than $821 billion, but it has proven difficult to determine how much of these assets are managed by businesses owned by diverse interests. A majority of America’s 50 richest colleges and universities decreases share data with the Knight Foundation for a report this year on the diversity of asset management companies managing endowments.

The data shared by participating institutions shows a general lack of diversity. The Knight Foundation previously found that across the entire asset management industry, white male-owned firms control nearly 99% of assets under management in the United States.

“In our research, we have examined whether or not there are performance differences between companies with diversified and non-diversified ownership, and we have proven three times that there are no statistically significant performance differences between diverse and undiversified businesses-businesses owned by diverse interests,” said Ashley Zohn, vice president of learning and impact programs at the Knight Foundation. It doesn’t make sense to us that so few assets are managed by companies with diverse interests, given the representation of the people.”

In 2020 Cleaver interrogates 25 colleges and universities with the largest endowments on the issue and found gaps in how institutions tracked data about their asset management companies. Most colleges and universities provided at least some data in response to Cleaver’s request, according to a news release.

“Institutions have gone out of their way to avoid saying what we all know, which is that they only work with a handful of black or Hispanic managers in the United States,” said Robert Raben, executive director of Diverse. Asset Managers Initiative. “If you’re not ready to say that and then we can have an adult conversation about why, we need to go back to Congress to demand the data, and that’s what this is about.”

Raben said only Duke University, Georgetown University and the University of California system provided meaningful data. The UC system sets the standard, he said, posting Annual Report that provide demographic data disaggregated by race, gender and ethnicity for their own staff and external managers.

He said other universities have chosen to to share an aggregated figure with Cleaver’s office regarding the diversity of their asset managers.

“They give you a big number – ‘28% of our money is handled by various companies’ – but you don’t know if it’s people in Hong Kong, white women, veterans, LGBTQ,” a he declared. “Everyone defines diversity differently… They just won’t tell you that of their $50 billion, 0.03% is managed by African Americans. They just don’t want to say it, even though we know it.

At Harvard University, which provided self-reported data to Knight, 26% of U.S.-based managers were companies owned by diverse interests, managing 19% of the $51.9 billion endowment. university.

University officials wrote in an annual report about the endowment they worked on to address the lack of gender and racial diversity in the financial sector for many years.

“While we are pleased with our efforts to date, there is certainly more work to be done,” the report said. “[The Harvard Management Company] continues to actively seek opportunities to invest with various managers and to maintain a staff that reflects these same principles.

For Raben, the lack of diverse companies managing university endowments is not due to a lack of talent or supply.

“But we have a lot of white people in these endowments who don’t really believe that the talent around them among women and people of color is genuine,” he said. “You have to decipher this, and the only way to decipher this is to expose what is going on. And what’s happening is we’ve got a ton of talent – black, Hispanic, Asian American, white women – and they’re not being used by the most elite and prominent endowments, even though they work well, and we don’t know why. ”

Raben said he hopes the bill will spur colleges and universities to take action and diversify their asset managers, even if it doesn’t pass.

“These are universities that have gone through diversity in every other aspect of the institution – the board, the management, the student body – but when it comes to the money, it’s ‘I’m not sure we trust black people.” he said. “This is the problem.”

New reporting requirements

Ronald C. Parker, president and CEO of the National Association of Securities Professionals, said in a statement that the legislation would help address the lack of corporate diversity in higher education.

“For years, the NASP organization has championed the reporting of total assets of higher education institutions by investment advisers to quantify the work done by minority and women-owned businesses,” Parker said. .

The Bill would amend the Higher Education Act 1965 to require colleges and universities to report information annually on investments in women and minority-owned businesses and require the Business Development Agency to publish a report every two years with recommendations and best practices for increasing the use of companies with diverse interests in higher education, and it would establish a conference to be held every five years for colleges and universities meet with investment advisers, firms and consultants to develop professional networks, according to the press release.

“Equal opportunity information should be public and not relegated to a team in a non-reporting back office,” says a fact sheet on the bill. “Universities recognize the effects of historical discrimination and can better recognize their role as a solution. Transparency is a first step in the right direction.

Cleaver said in a statement that it is “unacceptable” that most of the $82 trillion asset management industry is controlled by white men.

“As colleges and universities tout their efforts to diversify at every level, from student body to faculty and staff, I believe they are a perfect place to encourage greater opportunities in this intractable industry,” said Cleaver.

A number of other organizations praised the bill in statements shared by Cleaver’s office.

“Black and brown businesses need both capital and customers to thrive,” Ariel Investments said in a statement. “This legislation will help demonstrate, through clear annual reporting, whether black and brown businesses are getting the opportunities they deserve. We hope it will gain bipartisan support and pass it in Congress before the end of the year.

Gilbert Garcia, chairman of a Securities and Exchange Commission’s diversity and inclusion subcommittee, said in a statement that it would be appropriate to require colleges and universities to hire various companies to manage their endowments. , as the institutions receive taxpayer grants and research funds.

“Most importantly, it ensures that they really select some of the best managers, many of whom are currently ineligible for hire due to insignificant artificial barriers to entry,” Garcia said.