UK pension funds warn diversity will matter when choosing asset managers

Asset managers have been warned to fight a lack of diversity in their workforce or risk losing clients by a group of UK pension funds and investment consultants who collectively oversee more than £1bn assets.

The group, which includes UK pension scheme Nest and the Church of England Pension Board, has signed a new charter committing them to include factors such as gender and ethnicity in their manager decisions funds that win contracts to manage the money.

The move comes as the fund industry struggles to address the lack of women and non-white people in the industry, particularly in investment roles. Although asset managers have been outspoken about the need for the companies they invest in to increase diversity and have campaigned to end all-male boards, the industry itself has repeatedly been called of “pale, masculine and obsolete”.

Morningstar data shows that there are more funds in the UK run by men named Dave than by women. The Investment Association, the UK trade body for asset managers, found in a separate study that less than 1% of UK investment managers are black.

“Progress in the investment sector has been very slow. Despite many initiatives, we still see a lack of diversity,” said Helen Price, stewardship manager at Brunel Pension Partnership and a key charter figure.

Guy Opperman, minister for pensions and financial inclusion, welcomed the charter, adding that asset managers needed to be “more representative” of savers.

The charter was designed by several of the UK’s largest pension schemes, including RPMI Railpen, West Midlands Pension Fund and Lothian Pension Fund. He has also been backed by several investment consultants, who advise pension funds and other clients on where to invest their money.

Under the charter, diversity questions will form part of each fund manager’s overall evaluation score when bidding to win a new fund management contract or mandate. This means they will have to disclose information about the diversity of their workforce, something many have been reluctant to do in the past.

Price said the “events of the past year”, particularly the murder of George Floyd in the United States, meant diversity was “front and center” at many pension funds.

She added that information on race, age, ethnicity, sexuality and socio-economic background “is not systematically collected in a way that allows the industry to identify barriers and make significant progress”.

“We expect fund managers to manage diversity as an important investment issue, but we wonder how well they do if they don’t do much to address it in their own organizations,” he said. she added.

Last year, a study by Willis Towers Watson, the investment consultancy, examining more than 2,400 individual investment teams globally, found that diverse groups outperformed those without gender or ethnic minority employees. 20 basis points per year on average.

Diandra Soobiah, Head of Responsible Investing at Nest, said: “Having a wide range of skills, backgrounds and backgrounds will lead to better investment decisions and better financial results for our members. long-term.”

The charter has developed a questionnaire that signatories can use. This currently focuses on ethnicity and gender diversity, but will be expanded to include other measures such as socio-economic background.

The signatories also commit to including diversity as part of the investment managers’ ongoing monitoring.