Why Is #FinanceSoWhite? Emerging Manager Plans Can’t Scale

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Written by Ann Brown
Finance
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The finance industry so severely lacks diversity that one has to wonder why. Entrepreneur Nathalie Molina Niño, an investor with and  author of Leapfrog: The New Revolution for Women Entrepreneurs, broke down why fiance still has a diversity problem in an article for Fast Company.

“Talk of inclusion and greater representation for women and people of color has swept Hollywood (remember April Reign’s #OscarsSoWhite campaign?), corporate boards, and even the U.S. House of Representatives. But finance, from Wall Street investment banks to venture capital firms to asset management, remains the last rampart of the white, male elite,” she wrote.

And the proof is in the numbers. A recent study from Bella Research Group and the John S. and James L. Knight Foundation found that less than 1.3 percent of the $69.1 trillion in global assets are managed by women or men of color.  

A different study, this one by the Wall Street Journal, done in 2018, looked at the top 50 hedge funds, measured by assets under management, and found that there were only two with women as the top investment executive. And multinational bank and financial-services firm Goldman Sachs recently reported that its U.S. workforce is only 5.4 percent Black, 8.5 percent Latinx, and 37.8 percent female.

So why is #FinanceSoWhite? For a number of reasons, and one of the most important is that lack of access to money. 

“Prominent women and men of color in finance have been sounding the alarm for years, but the industry’s solution, so-called ‘emerging fund manager’ programs for up-and-coming investors, just isn’t scaling, despite evidence from across asset classes, such as hedge funds, that these managers tend to outperform other investors,” Niño wrote.

Say one wanted to launch their own fund to invest in companies, major initial capital is needed — $100 million to $300 million.

“Not only do most emerging-manager programs require at least $100 million on the balance sheet; most of them require fund partners to have an investment track record as a team, not just as individuals, and at least one previous fund together. In an industry where less than 2 percent of assets are managed by women or men of color, how are new players supposed to raise money and build investment track records? No chicken, no egg,” Niño pointed out.