Less than 20 percent of the assets held by major foundations is invested by outside firms run by women or people of color, according to a report released Thursday.
Commissioned by the Knight Foundation, the report found that 30 of the largest grant makers deployed a total of $11 billion, or 16.6 percent of their endowment investments, with firms controlled by women or people of color.
Using a diverse pool of investment managers has many benefits, said Juan Martinez, Knight’s chief financial officer. Diverse investment managers often put money into investments that white money managers don’t, which can add balance to an investment portfolio. And, he said, paying diverse asset managers had the benefit of creating wealth among finance professionals who have faced barriers to succeed.
In a previous study of the broader asset management field, Knight found that less than 1 percent of the nearly $70 trillion of assets under management in the United States was managed by diverse asset-management firms.
“This sector is investing with diverse managers at a much higher rate than the overall field,” Martinez said. “But the overall field is pretty paltry.”
Standing Out From the Norm
Four grant makers, Casey Family Programs, the Knight Foundation, Silicon Valley Community Foundation, and the Tulsa Community Foundation/George Kaiser Family Foundation, each had more than one-third of their assets managed by a diverse investment firm. The Tulsa and Kaiser foundations are separate entities, but George Kaiser is a major donor to the Tulsa Community Foundation.
Knight commissioned a similar study last year. The current report cannot be directly compared with last year’s data, however, because the two studies used different definitions of diverse ownership. In the previous study, an investment firm was considered to be diverse if it had at least one partner who was a woman or a person of color. The bar for diverse ownership in the current study was raised to 50 percent women or minority ownership.
If the current threshold for diverse ownership was applied to the 25 foundations that participated last year, investments managed by diverse-owned firms would have shown a 1 percent increase this year.
The study, conducted by data research firm Global Economics Group, attempted to compile investment data from the nation’s 55 largest private, community, and operating foundations. As was the case last year, several foundations either declined to participate or did not respond to requests for information.
Eight of the grant makers that declined to participate have their own in-house investment teams. The Gates Foundation, the largest private philanthropy in the United States with about $50 billion in assets, participated but only uses outside asset managers for “a sliver” of its investment portfolio, the foundation said in comments included in the study.
The increase in the number of foundations that responded is a good sign, Martinez said.
“They were willing to share data, which we think is a first step to really meaningfully tackle this issue.”
