Katy Graddy:
Thank you for joining us today for this exciting program. My name is Katy Graddy and I'm the Dean of the Brandeis International Business School and the Fred and Rita Richman Distinguished Professor of Economics. To those of you who are members of our community, alumni, faculty, students, staff and friends, I'm so glad that you've decided to join us for this webinar. And for those of you who have an interest in the topic but are not formally affiliated with Brandeis, it is wonderful to have you with us for this important event and we hope you remain in touch with our school and university.
Katy Graddy:
This event, Diversity in Asset Management, is the second in our multi-part trends in asset management series. Our most recent event last month was on the topic of value investing with Baupost Group's CEO, Set Klarman and Dan Jick of HighVista Strategies. Trends in Asset Management is sponsored by the Rosenberg Institute of Global Finance at Brandeis International Business School. It's an integral part of our school that was founded and funded by Barbra and Dick Rosenberg. We are indebted to the Rosenberg's for their vision and support of finance programing at Brandeis University.
Katy Graddy:
I also want to acknowledge the Brandeis Office of Diversity, Equity, Inclusion overseen by Chief Diversity Officer Mark Brimhall-Vargas for co-sponsoring this event and for their steadfast commitment to our communities efforts to be more inclusive and equitable.
Katy Graddy:
As a global business school with a majority female student body, we are proud of our school's long-term strength in student and alumni outcomes in the finance industry. It is in our interest, indeed, in the industries interest to support all talented individuals. Today's session is very relevant as Brandeis, along with universities and companies around the country, are struggling with the effects of COVID-19 on women in the workforce. Sheryl Sandberg in a recent Wall Street Journal report said, "Companies and women are at a crossroads, companies can rise to the moment and address burnout or lose scores of women and set gender diversity back years." This includes asset management.
Katy Graddy:
I am grateful to Deborah Shufrin, Brandeis Class of 1993, a member of our asset management board and Deputy Chief Investment Officer in the Brandeis Investment Office for convening this conversation today along with Stephen Denny, Robert Manilla, and Pamela Chan.
Katy Graddy:
After I hand things off to Deborah, we'll have a robust discussion. And after we hear from our panelists, Professor Anna Scherbina was to share more about her research on diversity in the finance field, but she has unfortunately been called away on a family emergency, so I will close the program.
Katy Graddy:
This event is being recorded, an email with a short survey will be sent out soon and we will ask that you take two minutes to tell us about your experience attending this virtual event. And just a quick note, we will not be taking live Q&A from the audience.
Katy Graddy:
On behalf of Brandeis International Business School, thank you again for joining us today. I am looking forward to an engaging conversation, Deborah, and thank you and please take it away.
Deborah Shufrin:
Thank you Dean Graddy. I'm very excited to be here and share with you some of the conversations that I've already had with our panelists, who are all very impressive in their own right. I'm not going to spend a huge amount of time going through all of their accomplishments because that would take up all of our time. So I will just go through some very quick introductions, but I will start with a huge thank you to all of our panelists for participating in this conversation. And I know we're all going to learn a lot from you. So thank you, just to start out with.
Deborah Shufrin:
So just to begin, Pam Chan, Pam is the Chief Investment Officer and Global Head of Alternative Solutions Group at BlackRock. She is responsible for leading the investment management of the Alternative Solutions Group and she's chair of the Alternative Solutions Investment Committee. She's served in many other finance roles at elite institutions before getting to BlackRock and can really speak to the career path in asset management pretty significantly.
Deborah Shufrin:
Our next panelist is Stephen Denny who's the head of Human Resources, Diversity and Inclusion for Putnam Investments. Stephen has been at Putnam for almost 17 years and he started out leading business roles within the organization and so really hearing about Stephen's career path and why he's pursued his role in human resources and in particular in diversity and inclusion, I think, will be particularly insightful.
Deborah Shufrin:
And then finally, Rob Manilla, who is the Chief Investment Officer at the Kresge Foundation and is responsible for the investments of the foundations endowment, amongst many other things that Rob does. Kresge has really been at the forefront of funding research and programs on diversity. So that's a really valued perspective that I think will round out the discussion that we're going to have today.
Deborah Shufrin:
So without further ado, let me just jump into the first question because I know there are so many things I want to ask you all and I know we're not going to get to them all, so I want to try to preserve as much time as possible. So I guess my first question to the panel is why is diversity personally important to you? And I guess I'm particularly interested in having you share one of your aha moments that really inspired each of you to become much more proactive in driving change within your organizations and with diversity in particular. And maybe what I'll do is I'll start with Stephen, given that you started in an operating role and you specifically chose to move in the direction that you've chosen, would love to kind of hear what that aha moment was for you and why this is personally important to you. And then I will throw it over to the other panelists as well.
Stephen Denny:
Great. And thank you Barbara and thank you for having me. And I want to up front thank you for giving me nine years back. I've actually been at Putnam almost 26 years.
Deborah Shufrin:
I did the math wrong.
Stephen Denny:
Just over 26 years, so I feel nine years younger today.
Deborah Shufrin:
Oh, good.
Stephen Denny:
And, oh by the way, I'm about to celebrate a birthday tomorrow, so thank you very much.
Stephen Denny:
I'll give you two examples on why this is extremely important to me. One being personal, one being professional. When I came to this country from a beautiful island called Barbados in the Caribbean and my focus on coming here was to go to school and become a doctor. And at the time I had an adviser who was a terrific individual and I really liked him. And as we got into conversations about what I wanted to do in my studies, he advised me that people like me never become successful at being a doctors. And the profile was, individuals coming from the Caribbean, coming here and studying medicine and being successful. And I believed he was a terrific individual and I truly appreciated the feedback that he gave me and I took that feedback and I switched to business courses. So that was, I think it wasn't until years later that I really realized what was going on at the time and sort of the biases that had set in while I was having that conversation with him. Because I have a friend who went through the same thing, also coming from Barbados, but they had guidance around them that allowed them to continue to pursue and now they're extremely successful being a urologist, one of the top urologists here in the Boston area.
Stephen Denny:
Secondly, at work, it was probably about 15 years ago when I started leading the diversity efforts. I'd sent an email out to the organization regarding Pride Month, June being Pride Month, I'd sent an email out. I'd started the role in February and I wanted to increase education in the organization. And one of the senior executives actually picked up the phone, called me and told me never to send that type of information to him again. And that became a real catalyst for me around, how do I educate the organization, how do I help people learn to appreciate and understand all perspectives and value people for what they bring to the organization and not just put labels on them. And that became extremely important to me. And I can say that's transitioned significantly, that individual is not longer with us. But that has transitioned significantly over the years where we have an executive team, a leader in Bob Reynolds, who's our CEO who's very engaged in our efforts.
Deborah Shufrin:
Great. Well, thank you. That definitely gives a lot of perspective. And thank you for sharing that story. Pam, do you want to try to follow that with your own sort of aha moment?
Pam Chan:
Stephen, you're making it difficult. So at first I'll say, thank you for including me on the panel. Great topic of discussion and so many different directions it can go. But I will take a page out of Stephen's book and try to bifurcate also kind of personal and professional because I feel like this topic is both personal and professional for me as a female and divers investor also.
Pam Chan:
So on the personal side of things, so I grew up in Canada, in Toronto. So very multi-cultural city. And frankly, diversity growing up was just normal. There was no actually weirdness that I had a Middle Eastern friend, a gay friend, a Black friend. It was just normal. And I think that is one of the things that I didn't realize was so elegant and beautiful until compare to a different kind of environment, especially in asset management where it's somewhat homogenous, right, on a relative basis.
Pam Chan:
And I would say the two aha moments for me, one was actually when I was younger. And some stranger just uttered a racial slur, right. And I didn't know the person, I don't know who that person is, right. You would think it would just roll off and you wouldn't think about it, but it really, really hit me very deeply and poignantly to the point that I was like, well, I'm a very confident and talented person. And the fact that that person just said that to me, literally just changed my entire week, month. I was thinking about it all the time and it got me to a point where I said, "Actually, self-actualization and achieving your goals is already hard enough, right, not least of which when somebody's antagonizing you, right, or you're not included." And so for me personally, I was like, how do I continue to create both in my personal life and in my professional life, different micro-cultures where that stuff doesn't happen, right. So that was kind of on the personal side.
Pam Chan:
I think on the professional side, one of the aha moments, and hopefully this is a nice contrast to the story that Stephen gave, so when I took my role as Chief Investment Officer of our $8 billion group, I look young, I am young, I'm a woman, I'm of color, all the check the box of all the things, right. And the transition was there were some clients who were skeptical. They were like, "Can she do the job?" And I think one of my aha moments was when a senior leader at our firm called me and said, "You just ran an amazing due diligence session." I mean, it was four hours of a proctology exam, right. "And I want to let you know that that was excellent, and no matter where the client ends up, that was excellent." And he was basically trying to, in some sense, prepare me for the bias that may come into that decision-making process. And I really appreciated that call. I mean, it was 10, 15 minutes but it was a great call. And I came out of there feeling, actually, I did it and that's wonderful. And that's how I should be as well. So maybe a little bit more, kind of on the positive side that there are lots of change agents out there. And sometimes those quick calls one-on-one make all the difference.
Deborah Shufrin:
So don't leave us hanging, did you win the mandate or not?
Pam Chan:
Oh I did, yeah, we ended up winning the mandate. Sorry. Yes, we did end up winning the mandate.
Deborah Shufrin:
Excellent. Thank you for sharing that, Pam.
Deborah Shufrin:
Rob, I know you and I have had some conversations about, some of the personal conversations that you've had while at Kresge. I don't know if that's your aha moment or if there are others, but would love to hear your personal story.
Robert Manilla:
Well, first of all, Deb, thank you very much for the invitation. You guys are probably all wondering why the guy sitting here in a hoodie in a cabin up in northern Michigan who works at a place calls the Kresge Foundation is even on this call. So let me back up and I'll actually do the personal and professional too.
Robert Manilla:
And the personal story is I was an auto guy for most of my early career. I worked in the auto industry. I eventually, I worked in a plant, I worked sales and marketing, I worked in product development and then even found my way into the investing world. And it became pretty clear to me that after managing a pension fund, been managing a pension fund at Chrysler that I loved being an investor but I wanted to do it some place that had a mission. And that took me to Kresge.
Robert Manilla:
And unfortunately that kind of checked the box. I was working for a place that had a mission to make underserved people in American cities better off. And I kind of thought that was enough, right. My job was to manage the assets, I'm working at a place that has a great mission. And there was kind of a little naivete maybe, just me hiding from the fact that, am I doing enough.
Robert Manilla:
So the aha moment for me actually wasn't around diversity per say for the racial justice reason of diversity. It was about five years ago, and at that time we thought things were overvalued then, forgetting what happened the next five years. And we actually thought it would be really difficult to make our appropriate risk adjusted returns looking forward. So we spent a lot of time around decision science. And so it was really the path of the decision science is very, very clear that more diverse groups make better decisions. And that was really the aha moment to think, let's look at our people, let's look at our portfolio, let's look at our networks. And do they all look like me, old white dude that's been doing this stuff for a while? And it really wasn't this get on the recent bandwagon of DEI, because that was part of what we do as an institution, but it was really around we need to generate better returns.
Robert Manilla:
So we really spent a lot of time, we brought in leading professors around the country to talk about decision science. And one of the ways you get to that diversity of decision makers is often characteristics around race, or gender, or sexuality. So we started down the path, probably five years ago, upending a lot of our processes around the idea that we needed to look at the world from multiple lenses because we're big in Detroit. The person growing up in the Midwest, predominantly male, predominantly white is not the only lens out there, believe me. So it really started down that path, was decision making and not necessarily from a racial justice view.
Deborah Shufrin:
Okay. Very helpful. There's a lot of things that all of you touched on that I want to sort of follow up more in the course of this conversation. But why don't we go from here to... We seem to be moving slowly from organizations viewing diversity as sort of a good sort of social equity, nice to have as sort of Rob just described it, to more of a business imperative. And it's really no secret that the investment management industry has really kind of lagged in adopting that view. But I think it's pretty fair to say that each of your institutions is playing a leading role here.
Deborah Shufrin:
Not all of the members of your team are going to get up to speed at the same pace, and some of them might not get up to speed. So my question is, what specific actions have you taken to try to create buy-in on your teams? And in cases where you encountered resistance or really feel like there's a team member that might not be able to get there, can they still be a productive member of the team or do they really hurt the whole groups progress on this issue? Maybe I'll turn it over to you, Stephen, first.
Stephen Denny:
Sure, thank you. Great question. I like to think of myself as a 80/20 guy. And since I'm talking to Brandeis, I'm going to say that I'm a 90/10 guy, because I at least want to get an A. I don't think I'm ever going to be able to convince everyone on the things that were trying to accomplish. I absolutely believe that this is a business imperative and I could point to examples where their organizations... Rob is in the pension plan place space and there are pension plans that we go after sometimes that give you very specific numbers that you might need to hit as it relates to trades with minority, women, veteran, disabled-owned organizations. And as we go after those businesses, I've seen instances where organizations, large organizations have lost those mandates because they've not been able to hit the targets that was laid out in gaining the assets.
Stephen Denny:
So it leads to business results as well, but it's also just the right thing to do. We've got to think about our society and how we're impacting our society. And I look at it and I look around Boston and where we are in the communities around Boston and the opportunities that we have to impact that, not only through investing but through employment. Boston is a majority minority city, 53% of it's residents. So if we can pull from those resources, it only makes us stronger as an organization to get those... You'll see all the numbers that talk about women leading organizations, how much more profitable. I think it's somewhere in the range of 15 to 18% more profitable than a more homogenous type organization. And then when you add diversity to that angle, that profitability goes up even further.
Stephen Denny:
So it's very important that we look at it from that perspective. So the approach I've taken here at Putnam is, it's two-fold. We've certainly been working with sort of a grassroots up effort, but it was also important that we engage our executive team and sort of bring... How do we filter down, cascade to all of our associates what we're trying to accomplish in those efforts? And gaining consensus for them has been key. We've got our executive team to agree that diversity is a top three business priority. So not just a priority, but it's a top three business priority within our organization. Our CEO, I remember sitting with him and having a conversation with Bob and he immediately embraced that and he was like, "At the next operating committee I want you to put it out to everyone and let's make sure everyone is marching to that tune." It's part of our score card process. It's part of our performance management process.
Stephen Denny:
So typically where I find more challenges is in the middle layers of the organization. Executives agree, we're going to go down this path but the middle managers are the individuals that really execute against what we're trying to accomplish and they got many day-to-day priorities to balance. And that's the group that we've spent significant time engaging and getting them on board with what senior leadership is saying, what the grassroots within the organization is saying and really driving actions that help them get there a lot sooner.
Stephen Denny:
Again, I'm going to take an A- at least, here. Where I think honestly we've done a lot better than just 90% of the people adopting what we're trying to do, but we don't quit. We keep going across the organization. We're constantly reinventing, reinvigorating, and trying to help everyone get there.
Deborah Shufrin:
And Stephen, I'd like to just emphasize something that you said to me in a prior conversation that we had, which was it was really important to you that you reported up directly to senior leadership and not to the director of HR. Why was that?
Stephen Denny:
Yes. It's because, it sends messaging. You can talk to many individuals and how they look at organizations and where there's diversity in particular line up against the priorities within the organization. And if you have someone leading diversity and reporting to the CEO on it, and Bob's agreed with this, so for diversity I report to him, it sends a message to the organization and it shows where you're heading from a cultural perspective within your organization as well.
Deborah Shufrin:
Pam, I'd love to get your perspective on this. Obviously Stephen has to think about this across all divisions, you've got your own team that you really have to worry about. How are you thinking about making sure that this is a priority for them? And if you don't feel like it's going to become a priority, how do you deal with that culturally?
Pam Chan:
Yeah, so I guess first I concur with, I guess, Stephen and Rob's response from the prior question as well. Which is that, not only is it the right thing to do, but there's a business imperative around kind of better decision making leading to better results, better risk management, especially as we think about portfolio construction and investing.
Pam Chan:
I think the one thing that I might add to that with kind of my BlackRock hat on, is we are first and foremost fiduciary. And in order to be the appropriate fiduciary, you have to represent the clients, the beneficiaries ultimately of the plans that you serve. And if we look at ourselves and we're not like that, then we have work do to, right. And so I think the confluence of those things have been, frankly, messaged from leadership of our firm in a way that is very real, right, tracking and how we look at promotions as an exco for instance within our division, how we look at recruiting, where are we losing people, right, to the extent that we're thinking about women and other diverse individuals. Do they hit a ceiling kind of at the VP, junior director type of level? And why is that? So I think it's being very transparent and unabashed about showing the data, right. So that everybody sees it.
Pam Chan:
I think at the team level, I think we've been pretty fortunate that I haven't had to deal with any resisters, if you will. But one thing that I think has been super effective, and we did this earlier on this year, especially around the topic of racial injustice was actually sharing personal stories, right. Not making it about some stranger that has a circumstance that no one can relate to, but rather someone that you know, someone that has a real story, right, as we talked about, even just earlier in the first question that you had. And I think making it personal and really then attributing kind of what is the collective contribution of that group, given those individuals, those specific individuals that are involved, that really makes it real. And then you look at, okay, what is the alpha that we've generated as a result? So that's at least how we've approached it, but I think to Stephen's point, really underscoring in the explicit and the more subtle ways, how important it is, is what you have to do.
Deborah Shufrin:
Great. Rob, you get to think about this, not only from your own sort of internal team but up to the managers that you're investing in and even to the degree that the foundation is funding research and diversity training programs. So I'd be curious to kind of hear how that all flows together for you.
Robert Manilla:
Yeah, so to think about this path, I'll actually quote a Wall Street Journal quote, and it said, "Minority owned firms are about to gain assets. This is the tip of the iceberg." Date, October 1987. This industry's been trying to solve this problem for 30 plus years and failed miserably, right? And I think part of that reason is we've tried to only make it a moral imperative and not a business case. And that's resulted in people thinking about it as a carve out of their portfolio, or the kiddies table at Thanksgiving or whatever, right. It's never been integral to how they think, make decisions and operate. And so I think making the case solely on, it's the right thing to do, I think will come in waves. There will be moments that's important and moments that's not important.
Robert Manilla:
So if, again, we don't come back to the business reason why it makes sense to have more diverse teams, groups, managers, I really think it's a battle that you will continue to fight. And in 30 years, hopefully the Wall Street Journal headline will be different. So I do think we're at a moment where the intention is certainly heightened, but we need to take advantage of it. And I live in the foundation world, right, so we're okay listening to moral arguments. It's kind of what we do, but when I put my... I sit on a number of pension investment committees and when I put my pension investment committee in, that's not really their job to solve diversity, right. Their job's to pay the benefits to their constituents. And so you really need to approach it from the business case standpoint.
Robert Manilla:
So that's generally how, when I think about the question of how do you overcome people who don't buy the racial justice argument is, actually I don't try to overcome it. I try to say, it's a good thing to do and we should try to do it, but I'm not going to try to change, like I'm not going to try to change who you vote for. I'm going to tell you why I'm doing what I'm doing and why I think it makes sense. And I think, again, it has to come back to the business case. And I think the more we can make those cases, and find examples, and point to things...
Robert Manilla:
And so I know we'll probably talk about, you mentioned the training. As investors most of us took some training on our biases, right, investing biases, we got anchors, we got this and that. But how much have we done on unconscious bias training, allowing things around racial equity. And as an institution that funds this, often lots of racial justice work, it's something we do often as an institution but I really had to imbed that in the kind of way we train on board and kind of educate our team, is let's really understand the unconscious biases you have. And oftentimes they're not there for bad reasons.
Robert Manilla:
I'll give you a great example is, we hire interns. And we used to screen our interns on prior internship experience. If you step back from that a moment and think, how do most interns get their internship experience, it's from their networks. And it was mostly white males who's father worked somewhere else. So we had that criteria for a rational reason, maybe it'll make them be a better intern for us. But as soon as you removed that criteria, which at the end of the day really didn't impact how successful they were working with us, when you remove that your candidate pool is vastly different. Now we never put that criteria in there to be excluding women or minorities, but that was the effect of it. And so I do think there is some training involved, there's some stepping back if you're getting results that just don't look like what you want and thinking about what could be causing that. And they're not, most of the times we've found there's very little blatancy. We're not trying to screen these things out, they were just happening in our process. So that's how I would think about it. Sorry to speak so long.
Deborah Shufrin:
No, no. That's fantastic. Pam, Stephen, do you guys have other examples of sort of unconscious biases that you have seen that you've had to sort of overcome through the years of, we'll call it this journey because in conversations that I've had with all three of you, you sort of described this evolution as really a journey?
Pam Chan:
Yeah, I mean I can give a couple of personal instances that may be interesting for the group. I mean, I have been in many a meeting, even today, where we go and meet, external counterparties... Well, I guess maybe not today, because we're all virtual, but before we were, pre-COVID today, when we were still meeting in person and I've been in many a meeting where our team sits on one side, the other team sits on the other side and the lead on the other side will sit adjacent my associate, right, because they assume that... By the way, the associate is very talented, right, he happens to be white and male, right. And so we'll sit that way and then when I open the meeting it's this moment of like, "Oh, god. We have just screwed up the whole dynamic."
Pam Chan:
And one of the things that... I bring it up as somewhat of a lighthearted example, but I also was, in talking to some kind of of minority VCs, one of the things that they raised was actually that moment of awkwardness that you have at the beginning when everyone's seated at the table thinking they're seated in the right places, but they're actually not, reduces the kind of willingness and the propensity for that person to then invest with that GP, because now they're totally off their game, their not focused on the track record, the quality of the investment acumen, all the things they should be focused on, they're actually focused on now there's this really awkward social tension, right. And so I think that's one example where I don't get offended by it, right, but at the same time I think it does change the commercial dynamics of being aware of what the ramification of the original bias then does to the rest of the meeting, I think is one thing that we all should kind of think about and reflect on.
Stephen Denny:
I'll also give a quick example here and that's a great point, Pam. And I've seen those instances play out many times within our organizations. Today's a very technology driven world and data's very important. I remember working with our data science team and they had built sort of an AI engine that would allow us to get to the best candidates. And we were actually piloting it and we were going to hire data scientists. And when they went through this process, we got to a group of finalists in the interview process that were 14 men, no women were included in that process. And I'm like, "How could this be? It's not possible, something, maybe the way you wrote the program there was a bias embedded in it." So I pushed on the team and I had them at least add two women to the process, who would have been number 15, 16, 17, 18 and I had them include those women in the process. And we got through the rounds of final interviews and one woman landed at the top and the other woman landed, we did a stack ranking, as number three.
Stephen Denny:
So it just reinforced that even as we look at technology today, we're building out these very dynamic and innovative processes, we've got to make sure that there are not biases that are already built in to that process because there's still a human element in what we're doing and we have to make sure that we're connecting that way from a personal perspective from individuals and understanding what we're bringing into our organization.
Deborah Shufrin:
Yep, that's a great point, because people sometimes think that the use of technology can help kind of eliminate some of these biases, but what we don't realize is that humans are writing those pieces of code. And so whatever biases, unintentional or otherwise, the person who's writing that code has is going to seep it's way into the algorithm. I'm curious, were you ever able to kind of dig in and sort of see what some of that unconscious bias that was creeping into that technological process was?
Stephen Denny:
Yes, there were four males that wrote the language.
Deborah Shufrin:
Okay. Rob, I think you had something that you wanted to say that I...
Robert Manilla:
Yeah. It's actually a great point, but there's a company called Textio, which essentially is a fancy word processor that will actually screen your language you're using in job descriptions and tell you based on the words what type, who you will attract. So if you want an African American male from the Midwest, it will recommend the word changes you need to use to attract those people. So AI can have it's downside, but there actually is groups out there trying to figure out how to actually use it productively. We use Textio and it's actually been quite helpful.
Stephen Denny:
Yeah, I agree with you Rob, because I also use Textio and it's I think, our job descriptions have gotten significantly better since using Textio and we've seen an increase of attraction to women, and Blacks, Hispanics as a result of what we've been doing with Textio. So I absolutely agree with you.
Deborah Shufrin:
So that really leads us into kind of a place that I wanted to take the conversation, which was really on the recruiting side. And I often hear people in the finance industry blame the lack of diversity on there being a pipeline problem, which seems like a tremendous cop-out given the majority minority populations that we have in major places across the country. And it would seem that those firms are either looking in the wrong places or using the wrong filters to inadvertently screen out, as we've talked about, or both. And I guess, it'd be really helpful to hear some concrete examples of ways that all of you have tried to implement things that enable you to attract a more diverse pool. Because if I actually take a look at the makeup of the recruiting classes that each of you in your organizations have had, it looks a lot better than the asset management industry as a whole. So you're obviously doing something differently. And so it would be great, particularly for the other asset managers who may be on this call who are battling with this problem, for you to be able to share some tips in terms of things that you've done that are maybe quick and easy or maybe are harder.
Deborah Shufrin:
Pam do you want to start?
Pam Chan:
Sure. So a couple of things, so I need to look into Textio. I don't know whether our diversity and inclusion people are already on that, but I like that thing. We're still doing, at least as it relates to our own job description, being mindful of how we describe criteria, knowing that for instance women may select out if you put things in there that are maybe more aggressive leaning in tone for instance. So just being cognizant of that, but I really like that app, it's something I wrote down to check for later.
Pam Chan:
In terms of recruiting and different tips Deb, I guess a couple things, one is we took a look at the schools from which we recruit. So in some sense, along the same line of thinking that Rob mentioned earlier about the interns, right, is to say if we only recruit from kind of Ivy league schools in the Northeast, plus Stanford, right, you're probably going to get a certain demographic. And so what we try to do was, we actually recently set out a hub in Atlanta. So first of all we put an actual real office that has lots of people in there and used this also as a pipeline to Georgia Tech and a bunch of other schools where maybe they weren't part of our conventional recruiting process, right. So I think expanding the aperture there in terms of which schools we're going to, I think is one thing.
Pam Chan:
I also think, just when we do the debrief within my own team, is asking ourselves exactly the question, Stephen, that you posed earlier, which is are these really the only candidates? And then the next question for our future as we interview people, are these really the best candidates, right? Or are they just like us, right? And that's why we like them.
Pam Chan:
And so having that honest conversation, I think, in a transparent and direct way seems to have really created a different complexion. And we still have lots of work to do, right, but I think making it open and honest is the first step.
Deborah Shufrin:
Stephen, do you have something to share here?
Stephen Denny:
Yeah, happy to jump in here. I agree there's not a pipeline problem. But I do believe that we need to start educating our communities earlier. And I'm talking, I have programs now in middle school, and high school, and into college that educates about the opportunities that are available in the sort of the asset management industry because there are lots of individuals within our communities that go off and have no knowledge about the opportunities that are available in our space. And I like to have this conversation around, in the White family household they're sitting at the dinner table or the kitchen table at night and the Wall Street Journal is out, or mom and dad are talking about the professions that they have. And that's sort of, even if the kids are not listening, they're hearing. And those things sort of filter to them. I
Stephen Denny:
It's very different in minority households. I know that in many cases parents are working a second job or the one kid's got to be helping babysit the other kids. So some of that messaging... In my household, those conversations happen now because I'm aware of them and I can have those conversations. But when I was growing up, no one was having those conversations at my dinner table. So we've got to educate our students starting really, really early about the opportunities that are available.
Stephen Denny:
And then how do we create internship opportunities for them? We actually work with a program here in Boston where we bring high school students in for summer internships and then we're very focused around some of the universities that we recruit with and bring in internship into the organization. And we focus on very diverse pools in our hiring process at the entry level point. And that allows us, one of the things we've done, we try to be constantly reinventing ourselves, and there's always a question about, why not go to some of the historically Black schools? For us in our recruiting process, we just don't have that reach. So what we've done for the campuses, we have some great schools here in New England, for the campuses that we're recruiting with, we connect with the minority and women organizations on campus. So not just do the fair, but we also do soda and pizza with those minority groups on campus and help them learn more about us.
Stephen Denny:
Actually, we're in the midst of a recruiting process right now for our premier entry level programs for next year. And right now, we are through video, participating with them. And out of the six schools that we primarily recruit from, we've connected with 70, seven zero, minority groups, women groups on campus that is now additional engagement for us in that process. And we're seeing the results in the candidates that are actually applying to our position. So I think it's very, very important to move away from that talent that doesn't exist and sort of reinvent yourself in a way that allows you to see that talent that does exist and create a process where you can get them into your organization, they can learn about you, you can learn about them. And I'd say right now, out of our internship programs, probably about 40% of those students are applying for our permanent positions coming out of those programs.
Stephen Denny:
Because we hire across the college campus, not just rising seniors. We also hire rising sophomores, rising juniors. But those who are rising seniors, about 40% of them are applying to our positions.
Deborah Shufrin:
Rob, I know the foundation supports a lot of organizations and research into some of these diversity initiatives. Would love to get your perspective.
Robert Manilla:
Yeah, so our scale is so different than Stephen's or Pam's right. So we're going to hire one student a year, right. But we didn't let that stale actually stop us from thinking about this. Because I couldn't agree more with Stephen's comments on earlier the better. So we've actually done a handful of things to help and it's not really for our pipeline, it's just for the pipeline. And what we realized, based in the Midwest and in Detroit is most students who are, even if they're thinking about finance are thinking about corporate finance, they want to work at the autos, they want to work at a corporation. They don't think of asset management.
Robert Manilla:
So we've carved out $2 million and given it each to two different universities, so they've each gotten $2 million if they'd create curriculum around stock picking. So we have two local universities who basically manage stock portfolios for us. And that was a way, really, to get those universities to create curriculum around asset management, which they've done.
Robert Manilla:
And then we went even lower, and we now with a group of local investors, teach in the high school in Detroit and Pontiac, basically what I would call, for those of you old enough like me, a home economics finance class. It's like what's the difference between buying a car and leasing a car? What's renting verse a mortgage? It's really the basic finance stuff that... It's life skills that aren't necessarily being taught in the high schools. So we do that in Detroit and in Pontiac, which are two suburbs, or Pontiac's a suburb of Detroit, but primarily African American.
Robert Manilla:
So we view that as, we're never going to make a difference with our one hire, but we actually can try to change the ecosystem a little earlier as one institution. And I would encourage smaller players that aren't as big as Putnam or BlackRock, are to think about what are the ways you can make that impact. In our own recruiting, we have done all the typical stuff. We pretty much have the Rooney Rule in place. We take interns from girls who invest every summer, we've taken an intern from John Rogers, the Ariel Fellows that John sponsors out of University of Chicago, and we mentor.
Robert Manilla:
The other thing that I would encourage my staff to do is I've asked each of them to find two to three young, it could even be high school, but it's generally college students and be their mentors and stay with them. So one of the local universities that manages our monies, Wayne State in Detroit, and I will tell you that we still talk to a handful of kids from the inaugural class of our stock picking class who graduated six years ago, five years ago. So we're still talking to those students, and that makes a difference, right, that you can actually have... And really they don't want to talk to me, the old white dude from the Midwest, they want to talk to my analyst who's 26 years old, African American, came through a different path, And it's really I think, been quite helpful.
Robert Manilla:
So we tried to find ways, given we're not the scale of a big asset manager, we don't hire that many people, that we could still try to think about how do you improve the pipeline.
Deborah Shufrin:
That's a great segway given what you've all discussed in terms of mentorship to move on from sort of the pipeline and the sort of initial recruiting to the retention and advancement. And earlier in this conversation, one of you had mentioned, why is it that even if you're successful at getting good candidates and diverse candidates in at the front end, that they don't seem to be filtering up to the sort of top positions in the organization? And so I guess the question I'd like to pose to each of you is, why isn't that happening? When, Pam, I think you mentioned taking a hard look at the actual data. I don't know whether you've actually been able to draw some conclusions from that. And obviously it is a challenge, so what are you all doing to try to tackle that challenge head on? So maybe I will start with you, Pam, since I think you raised it in one of your earlier comments and then we'll spread the wealth around.
Pam Chan:
Yeah, no, no, most definitely. I mean, what the data has proven out for us is that we have a lot of work to do. I think we're moving in the right path, but there's a lot of work to do, right. And it's at every level. I think the question around kind of retention and advancement, and particularly at the inflection, when you're kind of mid-career, I think there's a lot of good ways to make kind of the entry analyst class and I think we're already here, kind of heredity on a gender perspective, it's pretty diverse in so far as backgrounds, racially, et cetera.
Pam Chan:
But I think it's kind of in the middle that it suffers and I think there are two things that I put to this group for consideration, right. One is kind of the feeling of whether you have a sponsor or a mentor. Which by the way, I would differentiate between the two. I think you can have many mentors and they are kind of your advisors, et cetera, a sounding board, kind of the board of directors concept in your career. And then you have sponsors who not only tell you the door is there, the mentor will say, "Well, here are the five doors you could go through." The sponsor in my mind is the person who brings you to the door, opens the door, walks through the door, checks to see what's going on inside and says, "Okay, it's good for you to come in." Right.
Pam Chan:
And I think it's actually getting that level of sponsorship, especially at the mid-tier, that allows people to get the opportunities which are the senior level positions, right. Because we all know that it kind of starts to get smaller and smaller, right, into the number of roles and the way that people get tabbed for those opportunities is a lot of happenstance, right. And it's who you know and are you at the right place, the right time, is someone in that room who's deciding, thinking about you, right. And so I think it's creating that level of sponsorship, even if, and frankly from a personal perspective for me, I've actually found that many of my sponsors are white men, right. So it's not like I have to find an Asian woman to be my sponsor, right, if anything quite the contrary. But it's actually finding that sponsorship in the first place and cultivating it.
Pam Chan:
I think the second thing that I would note, and this again speaks to how you get tabbed for that opportunity, is it seems to me, and this is all anecdotal, right, so I haven't done statistically significant analysis of the data, right, but my observations have been that a lot of the, either women or minority groups, they end up getting pigeonholed in the types of things that they have expertise in, right. Whether that is, "Oh, you should go do marketing." Or, "You should do this structured finance element, and that's the thing that you should do." And so my own view, at least for my team in cultivating talent, is actually giving those people more visibility, connecting them with folks who do something totally different from what they do so that they can learn first what that other thing is. Secondly they get new opportunity and new questions from those people. And then hopefully rounding out a skillset which will make you, at the end of the day, a very talented executive, right, if that's ultimately the path you want to go up.
Pam Chan:
So those are the two things that I would say have really stood out to me as we think about advancement and retention.
Stephen Denny:
I'll certainly jump in and Pam, you're so dead on when you talk about mentorship, and sponsorship, and opening the doors and checking and making sure that it's okay to come in. Absolutely dead on.
Stephen Denny:
I think one of the... We've done, again, we're not at the size that BlackRock is at, so we're a little bit more flexible with how we can do some of our programing. We've gotten through the middle ranks a little bit easier and part of that is we started with succession plan. So what are the key roles across our organization? And what does that succession pipeline look like? And then, where are the woman and minorities within that succession pipeline? So we've just built it into our process and we've been able to, I'd say over the last five years, really move the needle on that middle pipeline.
Stephen Denny:
Where our challenge is, is at the more senior level. And that's that pyramid that Pam was talking about. The opportunities that are there are not that often, one. Two, we as an organization, and I'm sure Pam has seen some of this on her side, experience little turn over in those very senior roles. And when there is an opportunity, we've got to make sure that we're really doing everything that we can to diversify the candidate pool and get the best person into the organization.
Stephen Denny:
But it becomes more challenging for us as we haven't had much turnover at those levels. And we do do succession planning. So this is the model that I'm going to rely on the most that if... I've seen examples in the past of where one executive retires, moves on, and we hae the next person behind that individual and it's all white men. Our succession planning now has enabled us to have a broader candidate slate. And that sponsorship that Pam talked about adds another element of getting that person that your sponsoring through the door. And our focus is around women and minorities in that sponsorship that we're doing, to really get them in the door and into those next positions. And that's how we're going to continue to make progress.
Deborah Shufrin:
That's fantastic. I'm getting the signal that we have about one minute left and I have about 20 minutes worth of questions. So I will just throw out one last question, maybe to your Rob, since you didn't get a chance to weigh in on that last question. And I guess the question is about accountability because I know that Kresge is working on ways to try to measure diversity and think about that in a way that's kind of comparable across companies. And part of the question is how do you hold people accountable? What do you actually measure? And the second part of the question is do you... In that measurement, does that, when you have explicit goals and metrics do you risk that the diverse talent feels like they were hired more because they're filling a quota versus really being the best candidates for the job?
Robert Manilla:
Yeah, they're all good questions. And actually we think about it in three Ps. The people, the portfolio, and kind of the pulpit, which is like this, doing these kind of things. But if you start with the people, again, I think we've been at that for a while, trying to diversify our staff around decision making. Again, we're not a very big institution so I'm not... WE've never said we have to have X amount of women or X amount of minorities. We've said we want the best person for the position, but within that search we have all these rules, right, around what the candidate pool has to look like.
Robert Manilla:
The portfolio piece is probably the more interesting one. So we were very vocal, I wrote an FT op ed a year-and-a-half or two years ago, we made the statement we would have 25% of our US assets invested by 2025 in women and minority owned firms. And really that was putting a stake in the ground publicly for people to hold us accountable. And so again, it's not necessarily that 25's the perfect number or that 2025s the perfect timeline, but it is a journey and we need to be working towards metrics that are very different than what we have. So we're at 16 or so percent today. But it puts a very public number out there for us to shoot for and to put a little pressure on other people to think about why we would do this. Call me and ask the question, "Why did you guys do this?".
Robert Manilla:
And the third P is really... I don't tend to do a lot of conferences, my communication team doesn't trust me to not go crazy sometimes, so they hate when things get recorded because I haven't been good and I haven't sworn or anything.
Deborah Shufrin:
We're honored you showed up.
Robert Manilla:
Yeah, thank you. I tend not to do a ton of these, but that's actually different. I will do them for this cause, because I actually think it is the better way to invest. And the more people we can convince of that, the better.
Robert Manilla:
We're about to launch with a group called Lennox Park and a handful of other foundations, really a manager questionnaire. Because I know Stephen and Pam hate getting different questionnaires from every LP with different questions and they fill out hundreds of them. It's like there needs to be less friction in that system and we are going to try to partner with Lennox Park to standardize a questionnaire and a score for diversity that's much more nuanced than just ownership or economic carry splits or whatever. It's not perfect, but it is an attempt to get people to have some data, to Pam's point, we need some good data.
Robert Manilla:
And my hope is that people will actually use that and understand where they are in their journeys. And they'll actually use it as a tool and not any kind of weapon. And so we're trying in our little ways, a small foundation in Michigan, to begin to say, "Look, we need to keep pushing a little bit on this journey. And you need to think about it in my world in those buckets." The people, what are you doing with your portfolio, and what are you doing kind of with the industry to push them a little bit.
Robert Manilla:
Because people like BlackRock and Putnam get it, and they're working on it. And I actually think most big firms want to solve this problem. It's not an easy one. But the more we can be supportive and learn from each other and understand and think of unique ways for your institution to tackle this. And I think that's the key, is my solution doesn't work for another even foundation my size necessarily. It clearly wouldn't work for Stephen or Pam. But it works for us. Just go on your own journey and try to figure out what are the things that you need to do to make this difference.
Robert Manilla:
Because I think the one shining light is, is as bad as we've been, asset management broadly in this field, when we pay attention to something as an industry, we actually do it pretty well. I mean we're all successful and big firms are successful because they're good at things they care about. So I do think the glimmer of hope out there, after my pessimistic 1987 comment, is actually if we really do pay attention, I think we can make some change.
Deborah Shufrin:
Excellent. Thank you, Rob. That's a great place to stop. I have tons more questions that I could ask all of you, but I guess where I will stop is just to say this has been a really terrific conversation. I appreciate all of you taking the time to engage with us here. I think we originally thought that our next speaker, Anna Scherbina, was not able to join us, but I have just gotten word, I feel like I'm on the news anchor desk, this just in, that she is back. Anna is the associate professor of finance at Brandeis. She has done a bunch of research around gender in asset management. And we've asked Anna to just share a couple of very quick slides to highlight some of the findings from that research. So with that I'm going to thank our panelists and kick it over to Anna. So thank you.
Anna Scherbina:
Okay, thank you so much, Deb. And I'm so sorry to miss most of the panel, but I'm so glad to be back and catch the end of it.
Anna Scherbina:
So indeed I have a paper that looks at career trajectories of mutual fund managers in mutual fund industry. And we care very much about how well women and minorities do in high paying fields like this because we know that for a long time, women have been underpaid relative to men so there's a gender wage gap that means that women get paid less than men. They get paid roughly 80 cents on the dollar. And a big part of the explanation is that women just don't go as much into high paying fields such as asset management. So it is important to see what happens, why they didn't go, and if they go, what happens to them next.
Anna Scherbina:
And this is what my paper is about. So I got some data from Morning Star which is a company that tracks mutual funds and mutual fund managers, and I can track the trajectories of asset managers over time just to see who gets promoted, gets more assets to manage, who gets demoted, gets funds taking away and leaves the industry, as a function of their performance, the size of assets they already manage, and also education and also personal characteristics such as age, gender, and whether or not they're foreign born or US born.
Anna Scherbina:
And what I find is some disturbing trends. Is that all else equal, women don't get promoted at the same rate as similar men. So they're 8% less likely to get promoted to be given additional or bigger funds to manage. And as a result, they manage 22% less in total assets than men. And you can imagine that they also get paid less because of that.
Anna Scherbina:
And of course, if they don't get additional funds to manage as easily as men, if they existing fund closes or merges, they have no other assets to manage and they are less likely to get additional funds to manage. So they're more likely to then leave the industry. And they leave the industry permanently. So female managers are 50% chance more likely to leave the industry before the retirement age, then otherwise similar male managers.
Anna Scherbina:
So let me share some slides from this paper. And this is actually what is the disturbing thing that we notice, is that this is the fraction of female managers over time, from the beginning of my sample to the end of my sample, beginning of 2017. So let's focus on the black line which is the fraction of female managers for all active US-based mutual funds.
Anna Scherbina:
The fraction has been increasing, up until the year 2001, from roughly 11% to 14% but since then the trend has been very disturbing because the fraction of female managers has been declining. And it has been declining until the end of my sample to roughly 10%. And the blue line actually shows the same, but just for the US equity actively managed funds.
Anna Scherbina:
And this is something we should care about because if we care about manager diversity, here's another slide, actually female managers are more racially diverse than male managers. So while male managers are 85% white, female managers only 61% white. They're more likely to be Asian or of other races. So increasing the fraction of female managers is also going to help in terms of increasing diversity.
Anna Scherbina:
And so what are the explanations? I'm sure that you have already discussed, but part of it, to what we point in the paper is that women have weaker professional networks than men. And another part of the explanation is that when women work in co-management teams, they don't seem to get as much credit for good performance as male managers. So their future career outcomes are just not as good.
Anna Scherbina:
And we have already talked about solutions. So the solutions I think lie in recognizing how to attribute performance in teams and giving women more credit for the good work of the team. Also, if we do make concerted effort to bring more women and minorities into this field, the existing professional networks will get stronger.
Anna Scherbina:
And finally, if we make promotion decisions more quantitative based, really more strongly tied to past performance and less based on personal judgment and who you could relate to better, as an existing manager, that should also help women and minorities get promoted and get more assets to manage.
Anna Scherbina:
And so that said, I'm glad that we're all looking actively at solutions and I hope we continue this conversation in the future. And I would like to conclude today's event by really thanking all the presenters for their insights and by thanking all the participants for attending today's Diversity in Asset Management event sponsored by Rosenberg Institute of Global Finance and the Baupost Group at Brandeis International Business School. Thank you everybody.