Roundtable: Diversity and inclusion in asset management

Our expert panel look at the impact of diversity (and the lack of it) within companies, considering how we can promote a funds industry that is more inclusive in terms of gender, ethnicity, sexuality and social class.

Kathryn Woodley (global business manager, alternatives, Allianz Global Investors)
Catherine Jones (senior manager, fixed income operations and leader of diversity and inclusion efforts, Capital Group)
Catherine Morat (head of international marketing, Natixis Investment Managers)
Diandra Soobiah (head of responsible investment, NEST)
Steve Butler (chief executive, Punter Southall Aspire)
Zoe Taylor (chief operating officer, Redington)
Marisa Hall (director, Thinking Ahead Institute, Willis Towers Watson)

Funds Europe – There is now research showing that diverse groups make better decisions. Do you think the pragmatic case for diversity has been made and how important is that?

Kathryn Woodley, Allianz GI – It’s widely seen in that way now, and there is evidence to back it up, but quantifying it is still an issue. Investment management is a numbers industry, and there isn’t enough research yet for us to interrogate the numbers fully and push back on any scepticism.

Diandra Soobiah, NEST – The evidence we saw, going back many years, showed that having women in leadership positions helped companies sustain better economic success. If you look at short-term performance it’s difficult, but if you look at companies’ share price over longer-term timeframes, those with women in leadership positions do generally perform better.

The evidence also suggests that teams where individual members feel their opinions are valued help sustain economic success. It’s also about inclusion and ensuring teams are collegiate.

The evidence is stronger on gender diversity because it’s easier to quantify. Companies aren’t reporting information on cognitive diversity and people with different backgrounds as well, and so it’s difficult to measure. NEST wants FTSE 100 companies to get better at reporting this information. We’ve been engaging with the FRC to encourage companies to do more reporting as part of good governance, so investors can start to quantify what companies are doing on this issue.

When we appoint fund managers, we also expect them to be adequately diverse and representative of the people whose money they’re managing. Questions on diversity, gender pay gap, being part of the Women in Finance Charter are part of our RFP process and evaluation criteria.

Catherine Morat, Natixis IM – There is huge awareness now compared with 20 years ago, just as ESG which was niche 15 years ago and is now mainstream, but more action is needed. It’s a structural issue. You need to start with education, and the government needs to be involved to change how society promotes women and other aspects of diversity. Natixis affiliate Mirova, which has been investing sustainably for over 30 years, has just launched a women’s leaders equity fund. They believe it’s not just a social imperative. They see operational and financial performance benefits from investing in companies that foster broader diversity.

Catherine Jones, Capital Group – There’s so much research showing that building diversity into your process and teams leads to better business outcomes. Catalyst have published material supporting that view, and KPMG regularly send out research papers too. In the investment management industry, the challenge is that we are still quite wedded to the star system. At Capital, we don’t have a single star manager system. We build diversity into our decision-making through a team of portfolio managers managing individual slices of the portfolio.

Funds Europe – Do you think the star system favours the white-guy-in-a-spotty-tie type of fund manager?

Jones – Yes.

Zoe Taylor, Redington – In the investment consulting industry, we’ve largely accepted the ‘why’, but we’re still struggling with the ‘how’, whether that’s trying to recruit diverse talent, develop and retain it, or provide a culture that allows diverse talent to flourish.

At Redington, we believe that diversity brings better decision-making and outcomes. We’ve worked hard to get a management team together that is cognitively diverse. We’ve still got work to do on our board. We’re currently looking for a couple of NEDs [non-executive directors] and we’re thinking carefully about what the gaps are and how we can bring in people who round that out.

Steve Butler, Punter Southall Aspire – Inside an SME, every hire counts. The natural behaviour is to have diversity, because you need that for it to work. Making it part of the DNA is important. As CEO, managing diversity is about picking off individuals one by one for conversations across the business to shape the culture, rather than dealing with a historical problem.

From an age perspective, there is a conflict between a digital generation that’s grown up with its own set of values and culture and a non-digital generation. It’s about getting the business to understand that both have a lot to bring. When they come together, and there is a little bit of a rub, it’s worth working through the issues because what comes out the other side is good.

Marisa Hall, Willis Towers Watson – The separation of the business versus the values case for diversity isn’t helpful. Correlation is not causation. You find firms with diverse boards that have better performance, but that doesn’t mean diverse boards produce better performance.

You need deeper thinking on diversity. A lot of firms are realising that they have a role to play in contributing to the wealth and wellbeing of wider society; this includes ensuring that their employees at all levels better reflect their global customers.

There is also a difference between cognitive and representational diversity, and representational diversity matters just as much. When somebody who is autistic walks into the room, how powerful is the impact if they see an environment that is accommodating and inclusive to them?

Culture is important. It’s not just about having women, but about how included people feel.

There is research on the business case, but deep down, people don’t accept it. We surveyed 150 investment professionals in Australia. Over 80% thought the pace of change on diversity was too slow, while 5% thought it was too fast. So, has the business case been made? I don’t think so.

Funds Europe – Does the investment industry need to have less of a problem with doing the right thing?

Hall – Absolutely. Asset owners are the most influential capital owners in the world, and if they don’t do the right thing, then we all have a big problem.

Soobiah – The two are linked. At NEST, we want to be representative of our membership. Then you understand your membership, their values, circumstances and attitudes, and that means you make better investment decisions with them in mind. We have a diversity issue in general with pension boards, which do tend to comprise one demographic: older white men. How do we solve that problem? It’s a part-time role that younger people can’t fulfil, so it’s about finding the right strategy.

Butler – We still see lip service to D&I. You’ve got to go to the grassroots and change the way people behave.

Woodley – It needs to be driven by the top, but equally we need to think about the middle management level, because change is more likely to happen if we have those people on board.

Jones – People are happy to pay lip service until it impacts them. At Capital, we include men in the conversation around flexible working, because if you’re building this for your workforce, men benefit too. That’s when you get the ‘aha’ moment.

Hall – We often leave identity out of the discussion. People are made up of many components. When it comes to identity, it’s important to understand the different selves that all your employees have. We can then try to build policies around the full person. Diversity can feel like a numbers game; identity is about you, and we want the best of you.

Jones – Diversity often describes differences, whether visible or invisible. Inclusion means taking advantage of those differences. That’s often the challenging part that we need to change. The LGBT community often say they would come to work in the 1980s and not talk about what they did at the weekend. That person is not bringing their full self to work.

Funds Europe – We’ve talked about why. Let’s move on to how. How can we create a more diverse pipeline of candidates in terms of gender, ethnicity, sexual orientation and social class?

Taylor – You’ve got to push beyond existing recruitment channels. We’ve worked with organisations like Investment 2020 to find school leavers and offer apprenticeship programmes. We’ve offered a dozen over the last 12 years, and that’s had a huge impact. More recently, we tried returnships, working through a company called The Return Hub and bringing in five experienced senior women from different backgrounds. That proved successful and taught us a lot about flexible working.

These people had clear boundaries and showed us how that can work successfully.

Openly supporting organisations that promote diversity is important. It’s a signal to candidates that yours is a culture that embraces diversity where they can feel comfortable. There’s also a leverage impact. When you bring in diverse talent, they become your new hiring managers and recruit more diverse talent, so it’s a virtuous circle.

Hall – We tap into initiatives such as Investment 20/20 that supports entry into the asset management industry from the grassroots level. Also, initiatives like the Diversity Project. We are a sponsor of London Women’s Forum.

We took on six students from Investment 20/20’s Think Investment programme and did work shadowing with them. There was a lot of reverse mentoring. I didn’t realise how intimidating the City could be. One student refused to take off her coat, because everybody was really dressed up as we had an in-house event. That was a lesson. People are not applying to work in our firms because they are scared of what people will think of them.

In the recruitment process, we have taken off which degree you should have and whether you should have at least a 2:1 and changed the way the job specs are written. Some job specs are written in a very masculine way.

We also have recruitment panels, which are diverse across the organisation, so it’s no longer necessarily the manager whose team a person is joining who recruits them. On the recruitment panels, we don’t see their CVs, so we can only judge them from what they say.

The next step is understanding how neurodiversity fits into that. Interviews are good at picking up sociopaths and poor at picking up people who might have great pattern recognition because they’re neurodiverse. We’re considering sending interview questions to the people in advance so they can prepare, which is friendly to neurodiverse candidates.

Funds Europe – That could also help with social class diversity, because people often are not as confident if they didn’t, say, go to Oxford.

Hall – That’s true.

Funds Europe – Kathryn, could you comment in the context of the alternatives sector, which is sometimes perceived as being particularly undiverse?

Woodley – Our alternatives teams come to mind as one of our most diverse areas. It comes back to leadership. Our head of alternatives has been pushing this agenda and challenges her teams on hiring to ensure they have a diverse group of investors.

In alternatives and generally in our industry, we need to change the pool both from a demand and supply perspective. We need to do better at showing what our industry is and how we differentiate ourselves from the likes of investment banking.

A month ago, with another asset manager, we jointly held an Insights Program alongside the HerCapital programme organised by Sponsors for Educational Opportunity. Ten female undergraduates from different socioeconomic backgrounds came into our offices. They were surprised by the culture they found, by how laidback people were, the diverse people they met and the feeling of the office. We should be better at promoting that to help make this industry one that people aspire to join.

In terms of supply, as an industry we have relied too heavily on sourcing from universities. We need to change where we take our pool from, so there is greater diversity of thought.

Funds Europe – Does the fund industry have an image problem?

Soobiah – There’s a legacy problem. We need to dispel the culture that’s been presented for too long. The asset management/investment banking industry has been presented as having quite a ruthless and cut-throat culture, which hasn’t been appealing to women, especially to those who have just had children and want to come back into work, LGBT people and younger people from different social backgrounds.

In terms of the diverse pipeline, it’s about how we broaden it at executive board and CEO level. Flexible working policies and shared parental leave help. It’s about trying to level the playing field. Men should be able to take time out for parenting and hobbies too. NEST encourages staff to embark on volunteering schemes, to go away. It doesn’t have to be such a ruthless environment about work, work, work. It’s about changing that culture, being accepting of all types of people and behaviour, and being much more public about that.

Hall – As part of my industry work with #talkaboutblack, we often discuss the kinks in the hose that limit black talent getting to senior leadership. When you get into the industry, you unravel the first kink, then you think, ‘How do I fit in? How do I get promoted? How do I get to leadership?’

The statistics on black people in England are shocking. Young black people have more than double the rate of unemployment versus young white kids. Black workers with degrees earn 23% less than others with similar qualifications and over 40% of young black people are overqualified for their jobs. They are less likely to get promoted and get to board level – we know that more than 50% of FTSE 100 companies have no ethnic minority directors.

Soobiah – Some parts of the asset management industry are becoming increasingly diverse, but then there appears to be a stumbling block when you look further up organisations at more senior levels. Companies should be collating data on diversity. The more companies do that, the easier it will be to address this issue.

Funds Europe – Do we need regulation?

Soobiah – It is starting to come through. There’s regulation around reporting at the board level, but that’s a very narrow remit. It’s about what else is happening in the organisation

Funds Europe – Do you see big differences in D&I in different parts of the world? How does it work globally? Do we need quotas?

Morat – We have started to work with search firms that have diversity as one of their goals, such as The Ocean Partnership in the UK. Globally, we are looking for a search firm partnership that has diversity as a goal.

Natixis has set recruitment goals for different seniority levels by 2020. Good to report that in terms of our gender statistics, we have already been able to increase women by 3%-5% across different roles compared with last year. There’s more to do, but we are moving the dial in the right direction to boost gender diversity across the organisation from junior staff to exec level.

We are looking at embedding diversity measurement for senior managers in the annual appraisal. In succession planning, executive members need to identify at least one woman as a candidate. Some of those programmes benefit from economies of scale. We’re large in the US and Paris. In London, we have about 100 employees, so it’s a little harder.

Woodley – We have 25 offices in 17 countries around the world, and they all have their own challenges. Our diversity problem in Asia is that we have more women – a nice problem to have. In London, we’ve been focusing on mental health. Investment managers struggle with scale on this topic also. We’re quite big but we still have a scale problem with some of these issues in terms of being able to make an impact and move the needle quickly – unlike the larger investment banks, which have greater scale and resources to tackle it.

Butler – It’s different in an SME. We’re a regional business with 13 offices across the UK, so we’re recruiting from a different pool of people. The asset management industry is very London-centric, Regionally, you get a different set of people, so the diversity is there. Filling roles can be challenging, so you must be flexible. However, there is still a London challenge. Staff see London as the head office and therefore everything stems from London, so recruitment in London is important because it shapes the direction of the business.

Funds Europe – Is lack of regional diversity a problem for the industry generally?

Hall – We’ve got offices in Reigate, London and Leeds. Retention can be a struggle outside London, as can finding more diverse candidates. So, we must try harder by going into communities, doing partnerships with schools and making job roles more flexible.

Butler – I have disbanded our executive committee and replaced it with seven operating committees with a broad set of people, all ages, all backgrounds, all geographies. It gives opportunity for younger people to be involved in a leadership experience and breaks that London-centric thing.

Jones – On recruitment, it’s also important that candidates see a diverse interview panel when they come for a job interview. At Capital, we don’t believe in setting artificial targets, but occasionally there are situations where we feel we absolutely must hire a woman. Sometimes, it’s a challenge and you need to push the recruitment consultants.

Soobiah – NEST doesn’t participate in panels that aren’t diverse.

Jones – There’s so much you can do to create diverse panels by coaching women to speak on panels and getting them to practise those skills. That’s part of the problem.

Soobiah – Much of the end capital comes from women and other ethnic groups or minorities, so it’s important that we see this representation within the financial services industry.

Taylor – It’s also important to think about criteria for a role and how that opens out a group of candidates. We’re looking for two NEDS. One of the criteria was past board experience, but then we realised that would be hard for a lot of women to meet.

Funds Europe – Let’s turn to your CEOs and how committed they are to D&I. What do you internally to foster diversity?

Butler – It’s about weaving this into the normal narrative. I write a weekly blog, which is targeted at clients but read by the staff. For the last four months, I’ve been talking about intergenerational teams. It’s my job as CEO to tell stories. That’s how you get people thinking in the right way and remove unconscious biases.

Jones – We have two women on our management committee. To change the culture and take advantage of differences, we engage the workforce in communities. More than 50% of our population is engaged in communities: women, LGBT, NextGen community, working parents. They come together, share ideas and help influence policies. Working parents helped design our flexible work schedule and NextGen introduced reverse mentoring. We have town hall meetings between the management committee and community members.

Funds Europe– Are role models important in fostering inclusion?

Woodley – Yes. Our CEO, Andreas Utermann, leads our global I&D committee. We took a new approach last year, setting up eight workstreams on different topics to tackle some of the key issues. These include fostering women in leadership, engaging men in our gender equality efforts and making our workplace more attractive and inclusive for LGBT+, disabled people, and people from all origins. Each of those workstreams is sponsored by senior people in our business.

Soobiah – Our CEO, Helen Dean, is passionate about this. She wants the workforce to reach its full potential, which means empowering people to be themselves and make decisions in their role regardless of seniority. We want to create an open and collegiate culture. We have a hot-desking approach to encourage teams to meet other people.

Our CIO, Mark Fawcett, is an advocate of D&I. When we go to manager selection meetings, and if there’s an all-male fund manager team present, Mark speaks up and holds them to account. To achieve a cultural shift, we need to project our views and expectations externally, engage our partners, probe and ask those questions in RFPs and directly.

We have a broad D&I network. We don’t have individual networks for different groups. We want it to be an open network. Everyone’s concerns need to be addressed and heard at a collective level.

Funds Europe – We haven’t talked so much LGBT. What are you doing on that front?

Morat – Other than supporting the Investment Association’s commitment to LGBT rights in the finance sector, we haven’t done much concrete yet. However, it is being discussed as a diversity aspect that we need to allow to flourish in our workplaces.

In a smaller office, we wrestle with pushing people to report on this. It’s okay to contribute your personal story, and the culture invites that, but do we want to force people to put it on paper? It’s very personal. Your gender is a fact, but your sexual preference or religion belongs to your private domain. We’re not sure if we will report on this or just invite people to feel included. Again, it’s scale. If you have 100 people, do you want them to feel they have to label themselves?

We sent a confidential questionnaire to everybody in the UK office asking which diversity issues they wanted to hear about. Most ticked every box. That means we need to offer an inclusive diversity programme. It’s not just gender, and today the agenda is still mostly about gender diversity.

Hall – Last year, some members of our global steering group went on a three-and-a-half-day course with Fearless Futures, where one of the focus points was ‘systems of oppression’. In society, systems of oppression exist, such as racism, classism and sexism. They benefit a group of individuals, and it is in their interest to maintain the status quo. If you understand that concept, you recognise that this is not just about unconscious bias but about changing the system.

We also have networks, but we found that people wanted a broader conversation. We started running town halls on topics that were undiscussed though an internal series called ‘Let’s Talk’.

Outside the networks and events, we do mentoring. We have a programme called The Emerging Leaders Programme. What does the next generation of leaders in your firm look like? Do you have a programme that identifies those ten or 20 people and gives them the business training, the people training, the innovation training? And how diverse is that group?

Funds Europe – Unconscious bias came up there. How do you tackle that?

Taylor – Around 18 months ago, we did research on the performance management process and how we could rework it to remove unconscious biases. We researched continuous performance development, which moves away from annual reporting, where the person who shouts loudest gets promotions and the biggest pay rises, to something more fluid. We have a system now where anyone, from apprentice to CEO, can give feedback on anyone. That allows you to capture the whole individual and their contribution

We combine that with a remunerations committee that is empowered to challenge management and individual managers. That is a safety net to pick up biases. The remuneration committee also uses data to look at whether we have issues with age, ethnicity, gender.

Woodley – As a firm, we’ve moved beyond this topic, but it’s still important to think about it, and we remind our managers about it in their training. It’s about naturally and constantly removing those biases as part of the firm’s culture and processes.
Soobiah – It’s hard to change people. So, we’re rolling out management training next year that focuses on getting people to understand what their biases are. The best way of trying to overcome unconscious biases in teams is to have more diverse teams.

On performance management, we have 360-degree feedback now. It’s not just about your performance in the workplace but how you deliver it.

Taylor – We have an element of how in our performance measurement too.

Soobiah – The investment industry’s been results-driven, but how you deliver results is important. Exhibiting behaviours like respect, loyalty and team work support better cultures.

Hall – There is still a role for making people aware that they have biases, but we need to do much more than one-hour training once a year. We need structural integration.

Morat – Giving the opportunity for employees at any level to present to the full staff is important. We have ‘learning lunches’ where people can sign up to train everybody. It takes a bit of courage. It’s down to managers to encourage staff to volunteer because they get an opportunity to show that they have a lot of expertise to impart to their older or more experienced colleagues.

Funds Europe – We’ve established this isn’t a numbers game, but do you have measures in place to measure diversity and inclusion – and their impact on performance?

Jones – We measure gender and generational diversity in the UK. We don’t measure ethnicity in the UK, we do measure it in the US, and our management committee look at those three categories on a regular basis.

Taylor – It’s hard enough to measure diversity, let alone the impact on performance. We just have this on our management agenda permanently as a priority. Sometimes, you need to be careful with measurement metrics. One statistic doesn’t reflect what’s going on within the whole organisation.

Butler – I am producing our first report looking at age and gender demographics to report back to the business. The first step is being transparent so that we can talk about it.

Hall – At the Thinking Ahead Institute, we have designed a tool to help organisations measure inclusion. We’ve done culture surveys, not just in-house but with asset management and asset owner firms across the world. By doing that, we try to monitor over time whether people feel the culture of the firm is right, or a strong culture.

Within the institute, we also produce an integrated report where we talk about how we have added value across multiple capitals, from people to financial capital to natural capital. We think transparency makes you accountable.

Woodley – It can be challenging getting a firm-wide view due to the global nature of our business and the different regulations around reporting, but it’s worth looking at the numbers and putting in the effort. Ultimately, what gets measured gets done.

Soobiah – We responded to the gender pay gap, though we’re not required to. It was a helpful exercise because it showed a gender gap in leadership, which focuses the business on tackling it. We also do a staff survey and ask questions on culture. Any measurement helps in terms of action.

Morat – I understand the different positions on setting goals, but for us it’s about pushing change, making things happen, and having set objectives really helps with that. We have a yearly survey to get feedback on how employees feel. We are focused on transparency. The company is never shy of sharing where we stand.

Soobiah – We generally don’t like hard targets, but there is a place for them. They can be used to drive much-needed change in certain sectors, such as mining.

Taylor – We also need to measure where we aren’t getting things right. We’ve tried to foster a culture of psychological safety where people can speak up. We’re delighted when we get red flags because then we can do something about them.

Hall – Turn-taking is an important decision-making technique.

Soobiah – Yes. In our manager selection meetings, we often invite junior women and men present to give their view if they haven’t spoken. They speak up and they’ve got a lot to contribute.

Funds Europe – It’s confidence again, isn’t it? To end, could the asset managers comment on diversity in the client base. How can you make sure you accommodate diverse clients?

Morat – We must find innovative asset management solutions that meet their different needs. We think all the time about risk levels and different themes that people connect with.

We are committed to active management. Our PMs are close to the companies they invest in and seeing how governance works. Attachment to diversity is an important consideration.

Woodley – Sustainable investing is becoming an important topic for our industry for good reason. We must enable our broad and diverse client base to invest in line with their individual needs and aligned with their beliefs and social values. Asset managers can play an important role in this, and we need to do a better job at showing our clients and society this to help improve trust in the industry.

Jones – It comes back to representation, in marketing for example. It’s important to think about who your investors are. They want to see someone they can identify with.

©2019 funds europe



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