Investors are prioritizing capital allocations to advance social justice efforts
A new report from Cerulli Associates uncovers key trends impacting the institutional marketplace, which includes private and public pensions (DB and DC), endowments, foundations, insurance general accounts, and subadvisory. Access the report here.
February 6, 2023, BOSTON—Asset managers’ product development of social justice funds that address diversity, equity, and inclusion (DE&I) considerations are gaining traction as a growing number of investors allocate capital to solutions that invest in companies and communities that support people of diverse backgrounds, according to the latest Cerulli Edge—U.S. Institutional Edition.
More than one-third (37%) of asset managers are offering or developing products that address equal employment opportunity (EEO)/diversity and gender issues. Exactly one-third of asset managers’ product lineups and development efforts are focused on affordable housing/community development and labor standard themes. In terms of impact investments, diversity and inclusion (57%) and community economic development (52%) are top issues, with more than half of asset managers offering strategies that address these themes.
Asset owners are also prioritizing the following themes for their targeted capital allocations to environmental, social, and governance (ESG) and impact investment solutions: healthcare (56%), education (50%), diversity and inclusion (47%), and housing/community development (42%).
“Cerulli expects socially themed funds to remain at the forefront of asset managers’ product development rosters, as these issues are top-of-mind for an increasing number of investors,” says Michele Giuditta, director. “As more robust and transparent data related to social issues becomes available, opportunities will exist for managers to build out their product offerings.”
Prioritizing DE&I
Likewise, asset owners are prioritizing DE&I in the investment managers they hire, seeking to allocate capital to firms owned by or strategy assets managed by women, racial or ethnic minorities (e.g., Black, Asian, and Native American), and other underrepresented groups (e.g., LGBTQ+ individuals, people with disabilities, and veterans). More than one-quarter (28%) of institutions have hired a diverse asset manager, and another 10% have considered hiring one. Of those institutional investors that have hired a diverse manager, 50% estimate they allocate 10% or less of their portfolio assets to these managers.
“Increased attention on racial justice and systemic inequality has led U.S. asset managers and asset owners to step up their focus on DE&I within their organizations,” says Giuditta. “Institutions slowly are increasing the number of manager searches and mandates awarded to asset manager firms owned by women and people of color to promote diversity,” she adds.
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Headquartered in Boston with fully staffed offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.
