Milken Institute research shows that diverse teams outperform homogenous ones, says Troy Duffie, director, MI finance. For financial firms that don’t have a diverse workforce, however, it’s not something that can be wished into being.

“If you have a desire to build a more inclusive firm without a plan to get there, it’s like driving a car without a steering wheel,” Duffie says.

Troy Duffie

To that end, Duffie and the team at the Milken Institute have been researching diversity in the asset management sector and, earlier this year, came out with a report, “Inclusive Capitalism,” that lays out seven strategies for “specific action” in diversifying asset management teams.

These steps include both goal-setting, such as standardizing a governance diversity pledge, and setting up a system of mentoring and tracking for underrepresented employees. The Milken Institute’s recommendations, Duffie says, come in part from real-world examples gleaned from council members running large pools of assets.

“We ask our council members: What are you doing that works?” he says. “They find success not by saying, ‘We want to mentor people,’ but by putting a plan in place that would set up mentoring and track progress to ensure employees are getting opportunities and being given the chance to perform at a high level on a consistent basis.”

The task before the asset management space is vast, according to Milken’s research. Black, indigenous and people of color asset managers account for just 2% of the $86 trillion asset management industry, according to the Santa Monica, California-based nonprofit.

Milken’s seven steps are “proposed actions that are aimed to increase diversity, capture unrealized value and mitigate long-term risks within the asset management sector,” Duffie says. “These seven specific actions give [firms] ways they can do this within their firms with actionable steps they can enact immediately.”

The seven action items:

Redirect data and metrics on diversity “to be grounded in evidence that diversity is an element of fulfilling our fiduciary responsibility to optimize returns for our investors”;

• Expand the talent pipeline to source diverse talent and recruit from historically Black colleges and universities;
• Mentor and track employees from underrepresented groups; 
• Standardize a governance diversity pledge committed to addressing diversity in boards, companies and investment portfolios; 
• Intentionally convene with emerging asset managers and underrepresented asset managers; 
• Expand access to diverse managers by supporting underrepresented emerging managers; and 
• Standardize a scorecard for DEI that holds firms accountable. 

The institute is following its own advice, Duffie says, by partnering with 13 HBCUs to connect their students to Milken’s various business members. The institute is also working with partner firms to create a diversity, equity and inclusion scorecard for financial companies; 300 firms have already signed up to participate.

Citing the 2%percentage of BIPOC leaders in the asset management space, Duffie says industry leaders should consider: “What does it look like to get to 5%? What does it look like to get to 10%? We need to measure that marker to see how we are doing to actively get there.”

Aside from the data, however, Duffie notes that when it comes to the markets and business growth, the “math doesn’t have an opinion.”

“If you are not designing businesses and firms for the markets of tomorrow, you are leading a business that will die today,” he says. “Companies that are committed to our work … are building for the diverse markets and diverse worlds of tomorrow.”