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Pension schemes to monitor fund managers’ diversity performance

asset management diversity & inclusion

A group of UK pension funds is increasing pressure on fund management firms to share information about diversity so that industry progress can be benchmarked.

The pension schemes, who collectively manage £125 billion (€146 billion) in assets and include Brunel Pension Partnership, say the fund management industry suffers from “a severe lack of diversity” and they are inviting other schemes to sign an Asset Owner Diversity Charter.

Beyond the main steering committee, a further set of schemes and consultants with £1.08 trillion of assets has also signed up to the charter, which commits pension schemes to taking into account diversity and inclusion (D&I) records when choosing new investment managers, as well as ongoing monitoring of a firm.

RPMI Railpen, which manages pensions for railway workers, and Lothian Pension Fund, a local government scheme, are two schemes in the steering group of the newly formed Asset Owner Diversity Working Group.

David Hickey, portfolio manager at Lothian Pension Fund and co-chair of the group, said: “It is reasonable for pension scheme members to expect the money in the scheme to be run by a cross section of investment managers that reflect the diversity in the scheme.

“At the moment, this is not the case across pension schemes in the UK. Fund management front offices are currently dominated by white men, and we are not benefitting from the talent pools available in the populations of white women, Asian men, black women – the dominance of a single group suggests a problem with hiring and with culture.”

Helen Price, who is stewardship manager at the Brunel Pension Partnership and also co-chairs the group, said information on race, age, ethnicity, sexuality and socio-economic backgrounds was not consistently collected in a way that equips the industry to identify barriers and make progress.

“We expect fund managers to manage diversity as a material investment issue, but we question how well they’re doing this if they’re doing little to address it in their own organisations,” said Price.

By asking for the diversity information fund managers would have to “confront poor performance and begin taking much needed action on diversity”.

Diandra Soobiah, head of responsible investment at government-back pension scheme Nest, said: “Any fund manager unwilling to disclose should be a serious red flag for investors.”

Other signatories include West Midlands Pension Fund and London CIV.

The new charter has the support of government. Guy Opperman, minister for pensions and financial inclusion, said asset managers should be more representative of the savers they represent.

There are also other signatories outside of the initial steering group including LGPS Central and consultants Barnett-Waddingham, Reddington and Towers Watson.

Camradata (which owns Funds Europe) will provide free access to all managers to complete the questionnaire, which will ask about how firms make sure their recruitment processes are as unbiased as possible, and how they ensure equal access to mentoring.

“We recognise that not all firms are going to be able to complete the whole questionnaire at the outset,” an official group statement said. “The idea is for us to outline the direction of travel. We are not looking to make judgments based on a single snapshot, nor to benchmark asset managers against each other, but to understand each firm’s strategy, policies and approach to D&I and assess their progress against that as broadly as possible, taking a long term view and holding firms to account for ongoing progress.”

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