Five Senate Democrats called on the pension fund managers of 25 major companies to explain the lack diversity in the asset management industry.
“Women and people of color are dramatically underrepresented in the field of asset management,” wrote Sens. Bob Menéndez (N.J.), Elizabeth Warren (Mass.), Alex Padilla (Calif.), Tim Kaine (Va.) and John Hickenlooper (Colo.).
“Less than 1% of the $70 trillion in global financial assets under management are managed by woman or minority-owned firms. Women and people of color are also extremely underrepresented at the board and senior management levels at asset management firms,” the senators wrote.
The lawmakers added that across the industry, those in senior leadership positions are white and male. About 84 percent of executives are white and about 75 percent are male. Investment consultants share similar demographics, according to the senators.
The letters, which went out last week, reached the asset management heads of companies like Boeing, 3M, Citigroup, IBM, Delta Airlines, Raytheon and the Walt Disney Company, among others.
“This is a serious problem for the industry, investors, and the country as there is a wealth of data showing that greater diversity leads to greater profitability,” wrote the senators.
They cited a 2021 study by the National Association of Investment Companies that showed “diverse-owned private equity firms exceeded industry averages in virtually every performance indicator,” and another from BoardReady showing that companies with diverse boards on average grew during the pandemic, while less diverse companies experienced revenue losses.
The appeal to diversify and make transparent pension fund practices follows a series of calls by the senators, in particular Menéndez, to diversify a series of public and private institutions.
Last month, for instance, Menéndez joined Congressional Hispanic Caucus Chair Raúl Ruiz (D-Calif.) to call out the Federal Reserve for its decision not to appoint a Latino candidate as president of the Federal Reserve Bank of Dallas.
“While the Federal Reserve has made some recent progress in addressing its diversity issues, it missed an opportunity to achieve a critical and easily attainable milestone by appointing a Latino as the next president of the Dallas Federal Reserve Bank,” Menéndez and Ruiz said in a statement.
The five senators calling for diversity in asset management made a broader appeal to the companies, saying transparency and diversity in pension management will benefit millions of Americans.
“Despite the fact that millions of Americans rely on returns from corporate pensions for retirement and wealth building, there is very little transparency about who is managing these funds,” they wrote, adding a laundry list of questions about diversity in each company’s pension fund.