Diversity in Investment Management: What Are the Latest Trends and Insights?

Executive summary:

  • Our 2023 Manager ESG Survey shows that transparency around DEI data is increasing among investment managers. The results reveal that equity product managers in particular are more inclined to share DEI data compared to managers in other asset classes.
  • The survey also demonstrates that many managers are actively working to enhance diversity within their teams.
  • At Russell Investments, we are committed to maintaining robust DEI practices to foster a more inclusive industry and to unveil and untap the often-overlooked capabilities of diverse investment talent.

When it comes to research on diversity, equity, and inclusion (DEI) in investment management, the findings are clear: underrepresentation of women and minorities signals tremendous untapped potential. Numerous studies have demonstrated that investment products steered by women or minorities—and those from diverse-owned firms—match and often surpass the performance of their majority-led counterparts.1 Yet, as of 2021, diverse-owned firms represented just 1.4% of U.S.-based assets under management2, and despite rising attention, the industry has shown frustratingly slow progress toward diverse hiring and more representative allocations.3

Making headway on diversity is, of course, a matter of equity, but it is also about recognizing and harnessing a reservoir of overlooked talent and potential returns. Russell Investments has been following DEI trends for years, and we have made it an integral component of our manager research and selection process. While openness around DEI is increasing, obtaining useful data remains a challenge.4 One instrument in our arsenal is our annual Manager ESG Survey, which allows us to track trends and practices among asset managers. In this article, we delve into the results and explain how the data informs our investment process.

Annual ESG Survey results: Diversity-related trends and practices

The challenge of achieving diverse representation at all levels of an investment firm comes as no surprise to those in the investment industry. Transparency on this issue has risen, and most firms have stepped up their DEI efforts over the last few years. Because our manager research analysts are continually searching for the top investment talent, Russell Investments monitors these trends through our manager due diligence program. In 2016, we added a DEI sub-category to our assessment framework, and in 2020, we began tracking products that are women and/or minority led.

During the summer of 2023, we issued our 9th Annual Manager ESG survey, and as in years past, we included a set of questions designed to probe our money managers on their current levels of diversity and their approach to DEI. Russell Investments primarily uses this data to help us understand our pipeline of products and managers, but with hundreds of participants each year, the size of our survey can also be an indicator of industry trends.

One section of our survey inquires about the percentage of women and minorities on the firms’ boards, among their senior investment leaders, and as a percentage of their ownership. While this year’s pool of respondents reported a higher level of women and minorities among their owners and senior leaders, a closer look at the underlying data convinced us that those increases came from selection bias.