Investment’s journey toward diversity and inclusion

Investment’s journey toward diversity and inclusion

I have had the honor of managing the Weinberg Foundation’s investment portfolio for more than seven years, since the Foundation moved to manage its capital internally. Prior to joining the Foundation, I spent 13 years managing endowment portfolios for two different universities.

As I look back upon those more than two decades, I recall the vast majority of meetings and conferences being mostly white and male. The dearth of diversity now seems shocking. The investment industry, measured by the amount of investment capital managed, has grown exponentially over the last 30 years. Over that same period, however, representation by women and people of color has lagged considerably. One might suggest several factors that created and fostered this now glaring reality. But suffice to say that the demographic composition of the institutional investment profession generally has not reflected the communities served philanthropically. It certainly has not reflected the ideals of inclusion and diversity. Thankfully, quite intentionally, that is changing on a national scale. It is also changing for the Weinberg Foundation.

The Foundation’s mission is clear—to provide grants to nonprofits serving those who are experiencing poverty. While every Foundation employee is proud to support and be part of that mission, many senior leadership colleagues have endeavored to think of ways to add a mission-driven component to respective Foundation departments and everyday work.

For the investment team, the catalyst for action was the Foundation’s five-member Board, which—not coincidentally—has undergone change as well. In particular, the Board now includes two women, one of whom is Black, and the Board began asking more questions about investment manager partners, as well as how the Foundation sourced them, conducted due diligence, and ultimately hired them. In short, the Board began this important discussion even before it became a front-burner issue. The Board’s thoughtful and critical approach to the Foundation’s work in selecting investment partners prompted pause and serious reflection, including the composition of the Foundation’s internal investment advisory committee. Was the Foundation simply perpetuating the institutional structure and process that ignored—or even presented—barriers to a diverse constellation of rising stars?

For years, institutional portfolio managers wore metaphorical blinders. Fed by elite universities and colleges, as well as the expected networking, the investment field has preserved, either tacitly or intentionally, a homogenous talent pipeline. Compounding the issue of access, best-practice benchmarks—including risk-adjusted return, assets under management, and track record—sometimes turned into barriers that resulted in the consideration of only a handful of managers in each asset class. And, of course, there is the elephant in the (board)room: Just how much did the investment industry really want diversity? It should be noted that public pension plans probably should get the credit for being the first among institutional investors to actively pursue managers led by women or people of color. Private foundations (like the Weinberg Foundation) are probably the next group to focus on increased investment diversity, and the university world is beginning to ramp up efforts as well.

In 2018, the Weinberg Foundation’s investment team—in coordination with, and supported by, Foundation leadership—began working on a plan to make diversity and inclusion a major part of the Foundation’s portfolio. In addition to multiple internal discussions, the Foundation was also privileged to engage with several peer organizations, including its friends at the Detroit-based Kresge Foundation, who generously shared their findings, thoughts, and answers to numerous questions.

As part of its long-term goal, the Weinberg Foundation committed to reshape its investment portfolio so that at least 25 percent of its management firms are led by either women or people of color (the firm’s ownership being at least 50 percent diverse), while also seeking to increase the amount of assets under management by these firms. To ensure diversity throughout the Foundation’s entire portfolio, it also sought to find diverse managers in every asset class, to choose firms with a majority ownership structure, to attract and retain high-level talent, while also encouraging HR best practices that promote and support diversity.

Oh—and the Foundation aimed to do all of this in five years.

A sense of urgency, however, in no way diminished the rigor and due diligence applied to each potential fund manager. While Weinberg is a large foundation with total assets in excess of $3 billion, the Foundation’s ethos—rooted firmly in the legacy of Harry Weinberg—is proper stewardship of those resources. Every dollar managed well and multiplied through the Foundation’s investments translates into a total of approximately $130 million in grants each year (likely $140 million in 2022)—grants that quite literally change lives. Yet, while maintaining the highest standards for prospective managers, the Foundation also has demonstrated the willingness to invest even in a first-time fund with little, if any, “track record.” As many in the industry know, the most difficult time for a manager to raise money is usually when they are just starting. The Foundation has used the investment team’s collective experience to identify managers with extraordinary potential who simply need that initial opportunity.

The Weinberg Foundation is now in the third year of its diversity and inclusion investment initiative, and it has already surpassed its five-year goal. As of this writing, nearly 30 percent of the Foundation’s investment fund managers are led by either women or people of color, or both. In addition, the Foundation’s eight-member investment advisory committee now includes four women and three people of color, two of whom are women.

Of course, this is just the beginning, both for the Foundation and the industry. More pensions, endowments, and foundations are coming to the table to support and advance this critical agenda. However, asset owners, alone, will not solve the challenge of increased diversity. Many nonprofits, including Girls Who Invest and the Toigo Foundation, also have been doing great work for many years—opening doors that have been closed or invisible for far too long.

For its part, in addition to continuing the search for rising, new managers who better represent the fabric of our society, the Foundation is adding capital to its existing fund partners led by women or people of color. Perhaps most exciting, the Foundation’s investment team is now talking with other institutional capital holders to help them think through similar initiatives and is again reminded of the familiar quote by Vernā Myers, “Diversity is being invited to the party. Inclusion is being asked to dance.”

The entire Weinberg investment team is engaged with and committed to its diversity and inclusion initiative. But the greatest success, both as a foundation and as a society, will happen when diversity and inclusion no longer must be framed as an initiative—a special effort. No doubt, the Foundation must put in the work now. But it looks forward to the time when diversity and inclusion—equity and justice—are simply descriptors of good business and life in general.

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