Yale’s David Swensen Puts Money Managers on Notice About Diversity
America’s most prominent endowment chief has a message for the firms that manage the school’s money: Hire more women and minorities, or possibly lose the university’s backing.
David Swensen is the veteran investment chief of Yale University’s $31.2 billion endowment. Earlier this month, he told the dozens of firms that manage Yale’s money they would be measured on their progress increasing the diversity of their investment staffs. Mr. Swensen said the Yale Investments Office would be working to improve its own team’s composition, too.
The national discussion over race has resulted in an accelerated push for diversity on boards and in companies across the U.S. It has also prompted some investors to look at investment management, one of the least diverse fields on Wall Street. A 2019 study commissioned by the Knight Foundation found women- and minority-owned firms held less than 1% of assets managed by mutual funds, hedge funds, private-equity funds and real-estate funds in 2017, despite performance typically on par with firms not mostly owned by women or minorities.
Yale’s endowment, one of the biggest in the country, is watched closely by other schools given Mr. Swensen’s stature. He has championed the idea that big investors should diversify beyond stocks and bonds and incorporate qualitative assessments of managers into investment decisions. His approach has generated big gains for Yale and reshaped how endowments and foundations invest.
“Our goal is a level of diversity in investment-management firms that reflects the diversity in the world in which we live. Genuine diversity remains elusive, giving investors like Yale and your firm an opportunity to drive change,” Mr. Swensen wrote in a letter to money managers this month. Yale plans to ask its managers for relevant data on diversity annually, the letter said.
Mr. Swensen said firms would be measured annually on hiring, training, mentoring and retaining women and minorities on their investment staffs. Though Yale isn’t mandating specific targets, Mr. Swensen said the university could pull its money from firms that show little progress over time. Small firms that rarely make new hires will likely have more time to show progress, he said.
In a recent Zoom interview, Mr. Swensen, age 66, said he and others at Yale’s endowment had long discussed diversity with managers they were invested in. He said he had held off on systematic efforts to encourage more diversity at those firms in part because of a belief it resulted from an insufficient pipeline of diverse candidates entering asset management.
But the Black Lives Matter movement has had a galvanizing effect on him and the team, Mr. Swensen said, prompting discussions over Zoom about how to address the lack of diversity in the investing world. He immersed himself in newspapers’ coverage of the protests and said he was reminded of the activism of the 1960s, when he was a high-school student reading about the civil-rights and Vietnam War protests from his hometown of River Falls, Wisc. He said he was astonished and heartened by the movement’s impact.
但斯文森说，“黑人生命也是命”(Black Lives Matter)运动对他和他的团队产生了激励作用，引发了有关Zoom的讨论，讨论如何解决投资界缺乏多样性的问题。他沉浸在报纸对抗议活动的报道中，说他想起了20世纪60年代的激进主义，当时他还是一名高中生，在家乡威斯康星州的河瀑布阅读有关民权和越南战争抗议活动的书籍。他说，他对这场运动的影响感到震惊和鼓舞。
“I’m not going to make a contribution by marching anywhere,” said Mr. Swensen, who was diagnosed with late-stage renal-cell cancer in 2012, seated on a couch in his Killingworth, Conn., home. “So I figured, what can we do?”
Mr. Swensen said his thoughts on the benefits of diversity in investment management reflect the benefits he has seen at Yale itself.
Yale’s polyglot student body has enriched the university community and made Yale a more meritocratic place than decades ago, before women were admitted and when a quota on Jews existed, he said. He similarly hopes investment firms staffed by people with the broadest set of backgrounds will outperform those that are overwhelmingly white and male.
Mr. Swensen suggested in the letter, sent to the 70 U.S. managers Yale is invested with, that they consider recruiting directly from college campuses rather than traditional recruiting grounds such as investment banks.
He also wrote that he wasn’t focused on whether a firm was majority-owned by a woman or racial or ethnic minority. In the interview, Mr. Swensen said that approach could let managers off the hook too easily and take the focus off of how those firms are building their broader workforce. He also said firms can artificially engineer their ownership structures to fit the bill of being considered a firm owned by women or minorities.
It is a contrarian view compared with that held by many institutional investors. Firm ownership has become a common proxy for diversity.
The ownership metric was crucial in an inquiry earlier this year by Reps. Emanuel Cleaver II (D., Mo.) and Joseph P. Kennedy III (D., Mass.), when the legislators surveyed the largest U.S. college and university endowments to ask about their use of diverse-owned investment firms. Endowments haven’t routinely tracked the diversity of their money managers, but the inquiry and possibility of legislation have helped sparked discussion at multiple endowments beyond even those included in the inquiry, said several endowment chiefs.
所有权指标在今年早些时候密苏里州民主党众议员伊曼纽尔·克利弗二世(Emanuel Cleaver II)的一次调查中至关重要。和约瑟夫·P·肯尼迪三世(马萨诸塞州民主党人)，当时立法者调查了美国最大的学院和大学捐赠基金，询问他们使用多元化投资公司的情况。几位捐赠基金负责人说，捐赠基金没有定期跟踪其基金经理的多样性，但调查和立法的可能性帮助引发了多个捐赠基金的讨论，甚至超过了调查中包括的那些捐赠基金。
Rep. Cleaver said in a written statement this week: “Discussions on legislation are ongoing, and we will continue to examine this space closely to see how Congress can further diversify an industry that has preserved an alarming level of historical inequality.”
Despite the push, some female and minority founders say formidable hurdles exist in raising money and that expanding how diversity is considered could make it even more difficult for their firms to grow. In addition, some asset managers say it could be intrusive to make their employees identify their race and gender.
The Yale Investments Office will report on the progress it makes on the diversity of its own staff annually, Mr. Swensen said. While the number of female protégés of Mr. Swensen’s that have gone on to run the endowments of schools or foundations outnumbers that of their male counterparts nine to five, Mr. Swensen said Blacks and Latinos should be better represented on Yale’s investment team.