Public pensions show uneven progress toward diversity goals

The investment profession is slowly moving away from the stereotype of “pale, male and stale,” as newer and smaller money managers take advantage of opportunities with large public pension funds.

Public pensions are increasingly interested in diversity, seeking to invest their assets with more women-owned and minority-owned firms. But how to how to achieve diversity — and even what it means — remains open for debate, and differing legal frameworks and practical challenges have contributed to uneven progress toward diversity goals.

Pension plans cite a wide range of reasons for improving diversity among their internal staff and external managers, including social responsibility, better returns, growing the ecosystem of potential investment partners, and hedging against over-commitment to an investment class that thinks the same way. While those goals are not universally shared throughout the U.S. yet, California, Illinois, New York, Oregon, Ohio, Michigan, Maryland,
Pennsylvania, Texas, and North Carolina are among the places where pension funds have active diversity outreach programs. So far, pension funds have found willing partners among investment consultants, managers of funds of funds, and advocacy groups devoted to advancing the interests of women- and minority-owned businesses,
California State Teachers’ Retirement System (CalSTRS) CIO Christopher Ailman said at a May Diversity Forum co-hosted by California Public Employees’ Retirement System CalPERS) and CalSTRS.

“People have really realized that groupthink is a problem and you want to diversify away from that,” Ailman said. “Maybe they’re giving us lip service, but some managers seem genuinely interested in trying to break that mold. They have too many people from East Coast Ivy League schools who all think alike…It’s not just a California interest, it’s broadly shared, not just in the U.S.”

Read the full story: Public pensions show uneven progress toward diversity goals

Published by Money Management Report/Pageant Media.

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