There is a significant positive correlation between the diversity of ownership in asset management firms and the diversity of their portfolio management teams, according to new research from the Knight Foundation.

The research shows that diverse-owned firms are at least three times more likely to have a diverse team compared to non-diverse-owned firms. This relationship between ownership diversity and team diversity holds even after controlling for firm size, the share of employees that are owners, and the domiciled state.

If an asset owner hired a diverse-owned manager at random without knowing anything else about it, there is a 75% chance that the firm has a diverse team. In addition, diverse-owned firms are closer to team-ownership parity compared to non-diverse-owned firms, with team diversity levels at or just below ownership diversity levels.

Meanwhile, non-diverse-owned firms are larger than diverse-owned firms ($20.7 billion vs. $8 billion, on average) and therefore contribute substantially to the large imbalance between team and ownership representation across the firms in the sample when measured by assets under management.

Evaluation of team representation at the intersection of race/ethnicity and gender reveals that women are vastly underrepresented on teams. The foundation’s report shows that women manage 23% of the AUM sampled. Asian women are the nearest to gender parity, managing 34% of the $640 billion in Asian-managed AUM. Meanwhile, Black women manage 11% of the $80 billion in Black-managed AUM.

The report states that “ownership diversity has a strong positive correlation with team diversity at the firm level. Furthermore, it shows that, in terms of total AUM, diverse representation is greater on teams than in ownership. This differential is driven by (1) diverse representation on teams at large firms with zero or relatively low ownership diversity and (2) greater representation on teams of certain groups relative to others––namely, a high percentage of diverse team members come from the Asian minority group. Women of all races and ethnicities––and, in particular, Black women––are underrepresented relative to their respective proportion of the total U.S. population.”

Those looking to invest in companies that promote gender diversity in the workplace may want to consider the SPDR SSGA Gender Diversity Index ETF (SHE). SHE follows the SSGA Gender Diversity Index, presenting investors with a basket of companies with superior gender diversity in senior leadership roles relative to other companies in their sectors.

The six-year-old fund holds 191 stocks. Its components score well in terms of gender diversity in top management roles, including CEO.

SHE allocates almost 42% of its roster to technology and healthcare stocks, while the consumer discretionary and industrial sectors combine for almost 21%. None of the fund’s components exceed an allocation of 6.11%.

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