Black fund managers face much more scrutiny from institutional investors than their white peers, even when they perform better, according to a study by Stanford University and a private investment firm.
The study by Illumen Capital and Stanford SPARQ found that asset allocators rated high-performing funds led by white managing partners more favorably than equally high-performing funds led by Black managing partners with identical credentials.
“It’s not simply a pipeline problem,” said Stanford psychologist Jennifer L. Eberhardt. “African Americans who are most qualified, those with the best track record, are getting blocked the most.”
The research found that professional investors did not favor hiring or investing in professional funds managed by people with diverse backgrounds. Less than 1.3 percent of the $69.1 trillion in global assets are managed by women or people of color.
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“I’ve observed investors leaving money on the table because they underestimate the value of funds managed by people of color and women,” said Daryn Dodson, Illumen Capital founder, in a statement.
“But many of these investors did not seem to harbor conscious prejudices or even notice their biased behavior.”
White male-led venture teams were rated stronger and marginally higher than Black-male-led teams, which means Black-led teams are more likely to encounter bias when their credentials are stronger, the researcher said.
“Our data indicates that top-performing managers of color may be most harmed by racial bias,” the report stated. “Even when funds led by people of color possess identical strong credentials as white-male-led funds, they are judged more harshly.”
