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Trusted Answers: How Does Diversity Improve Your Investment Office?

by trusted insight posted 2years ago 3745 views

Improving diversity within a team can have profound effects on portfolio performance. Many of the institutional investors we spoke to cited theories as to why women make good long-term investors, and how a team approaching an investment decision from a range of perspectives and backgrounds can create more positive outcomes.

In this week's edition of Trusted Answers, we look at some institutional investors’ insights on diversity:

Women are good long-term fiduciaries. There’s actually been a scientific study correlating high levels of risk taking with high levels of testosterone.

I think there are a lot of great women in endowments for a number of reasons:

Women are good long-term fiduciaries. There’s actually been a scientific study correlating high levels of risk taking with high levels of testosterone.

Also, I think the number of women in any given field builds on itself when there are women role models. Endowment management is very results oriented and that helps with the work/life balance. It’s very clear what you need to do and how you need to do it. This makes it easier to prioritize; you have control over your time.

[The women role models who had an influence on my career were] Paula Volent [senior vice president for investments] at Bowdoin College and Jane Mendillo [president and CIO from 2008-2014] at Harvard Management Company. They are great women, great endowment managers.

Amy Falls, Chief Investment Officer, Rockefeller University Endowment
Read the full interview here.

 

I think [the reason women are better represented in endowments than other areas of finance] is the long-term nature of endowments. We don’t have a liability schedule other than the payout to the University. That enables us to think longer-term. I think women tend to be more long-term minded, which is consistent with the goals of an endowment: what decision can I make today that will have a long-term positive effect on the university.

To that end, I also think women shy away from more short-term risk, although that may be based on more anecdotal evidence than anything substantive. I recently attended an industry women’s forum in NYC and the topic of there being so few women in hedge funds became a focus. One of the reasons cited was that hedge funds involve a lot of short-term high stress and expectation; if you don’t make it, you’re out. There also appeared to be few opportunities for women to be mentored and encouraged from the initial recruiting process through the portfolio management levels. Of course there are a number of very successful women hedge fund managers globally, but they represent such a small minority within the total pool of managers. The hope is that will begin to change.

I think women have good intuition and good long-term judgment. So being benchmarked to long-term metrics is something women are more comfortable being measured against. Endowment returns are [calculated] on a 3-, 5- and 10-year basis, so it’s a different sort of risk taking.

Another reason there may be more women in endowments and foundations versus other sectors of finance and investing, is perhaps a greater personal alignment with the university or foundation’s mission. Women have a propensity to participate in civic and charitable activities. To that end, an investment leadership role within an E&F (endowment and foundation) combines a passion for investing with aspirations to serve a charitable mission. It’s a unique combination that likely appeals to women.

Julia Mord, Director, Tulane University Endowment 
Read the full interview here.
 

There are a lot of amazing women in this space. I’ve been surprised by how many thoughtful, smart, driven women there are in endowment investing. I think you can balance your work life a little bit better on the endowment side than the GP side. I believe women also are really good at and enjoy the relationship side of this business.

McCall Cravens, Then-Managing Director of Investments, Southern Methodist University
Read the full interview here.
 

Diversity is such a huge part of Carnegie, and it has made a huge difference in the dialogue we have, how we engage and how we create value. I would be remiss in not saying that we are a team that is more women than is probably typical, even in the foundation space. We have people from all over the globe, as far as where they’ve lived and where they grew up. The one thing that we are not sufficiently diverse in is schools. We all come from the same schools, and that’s the common strategic bent that binds us.

We think about things from a slightly different perspective. Some people come from a not-for-profit background, a development background. Some people come from real estate. Some people come from a much more technical background. We have east coast, we have west coast, we have people from the middle. All of that makes for really healthy conversation. That’s an important part of who we are.

Kim Lew, Vice President and Chief Investment Officer, Carnegie Corporation
Read the full interview here. 

We really do believe that having diversity of thought around the table generates better investment outcomes.


Within our team, we have a lot of diversity in terms of ethnicity, gender and background. The strong focus on diversity and inclusion is something that's very central to Exelon at all levels, starting from the top of our organization at the Board. It is part of how Exelon hires, how we finance the company, how we chose our vendors, and how we invest.

We really do believe that having diversity of thought around the table generates better investment outcomes. Everyone is open in terms sharing their opinions, and our team discussions are always very interesting because of the different viewpoints. I think having that culture and diversity makes us a better investment office.

Chrissie Chen Pariso, Senior Portfolio Manager, Private Equity, Exelon Corporation
Read the full interview here.

Trusted Answers is a weekly series that delves into some of the most pertinent issues within institutional investing, and shares some of the insightful responses from the 40+ institutional investors we have interviewed in the past year. Take a look at some of our other Trusted Answers.

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