Fund Allocator Plots Extra $20 Billion for Minority Managers

(Bloomberg) -- Jasmine Richards thinks fund investors should help boost diversity in the money management industry -- and she has a plan to do just that.

The head of diverse manager research at Cambridge Associates aims to roughly double clients’ investments in minority managers to 10% of Cambridge’s assets under advisement in five years. For a firm that advises on $410 billion, that means an increase of just over $20 billion. And it’s something that investors are taking an interest in, she said.

“On a weekly basis I’m at least having two or three client conversations,” Richards, said on a Zoom call. “Two years ago it was, maybe, once a month.”

Cambridge Associates defines diverse managers as those from underrepresented ethnicities, races and genders.

Richards, who is 39 and based in Boston, spoke to Bloomberg News about what needs to change in the industry and the role allocators -- institutional investors in hedge funds and private equity funds -- can play. Her comments have been edited for clarity and length.

On Interest in Diverse Managers

“We’re working with clients, altering their investment policy statements. And those types of changes that are going to last beyond this moment. I think that’s what needs to be done at this point -- it’s not to pay lip service, but to really figure out what is the long term picture and how do you make changes that last?”

What Changed for Investors

“The trigger has been a confluence of several factors. We definitely are in an environment where we’ve unfortunately seen the outcomes of tons of social injustices. But what has happened in this environment, which I don’t think has happened in the past, is that moment has been met with the availability of tons of data. So previously someone would have thought, ‘if I’m investing in diverse managers, I would have to accept concessionary returns.’ We know empirically that is not true. That there is no trade off in performance or investing with diverse managers. If anything, they outperform in the top quartiles of performance.”

On the Role Allocators Play

“We have a major role as investors in these funds. At Cambridge we are looking to use our position in the industry to really affect change. Understanding that 2% of industry assets are with diverse managers, to affect change we have to also ask questions of the other 98%. For firms that are not diverse, it’s understanding what the future of those firms is going to look like. How are you effecting change for the future?”

How Investor Demand Has Helped

“If this was five years ago, particularly within the hedge fund industry, you would get a complete lack of transparency. We’re at the point now where if enough investors demand that information, you have to answer those questions. It’s not only answering questions but also understanding what you’re going to do with that. As we ask for different levels of transparency, we also dig into what’s underneath them. It’s one thing to say, here’s the level of diversity that we have at this firm. What we’ve been asking managers for is specific breakdowns to uncover issues because then I think you’re better able to target the areas where they need improvement.”

On Hiring Advice for Hedge Funds

“I would encourage hedge funds specifically to think more creatively about their recruiting. To not simply recruit from within an industry that already is lacking diversity. For example, if you are looking for the next big semiconductor analyst, that doesn’t have to come from someone who’s already doing that work. There are other ways you can be qualified for that role. Just thinking more creatively about expanding the pipeline because there’s tons of talent out there.”

On Why Hedge Funds Are Slow to Change

“The turnover in hedge funds in some ways is going to be, by nature, much slower than an investment bank or a law firm. If we’re investing in a hedge fund that hires a new analyst once every 10 years, it’s going to take longer to see those changes. But that’s also why it’s very important for us to have that conversation now so that when that position does open, that we are clear with the manager about those expectations.”

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