The Washington PostDemocracy Dies in Darkness

Opinion Maryland’s universities and foundations are plagued by a little-known diversity problem

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Jazz Lewis, a Democrat, represents Prince George’s County in the Maryland House of Delegates. Brooke E. Lierman, a Democrat, represents Baltimore City in the Maryland House of Delegates. Dereck E. Davis, a Democrat, represents Prince George’s County in the Maryland House of Delegates.

Across the nation, major institutions — including large corporations, universities and foundations — have increasingly adopted a public commitment to diversity and inclusion. From introducing new trainings and protocols, to changing hiring practices and funding new initiatives, progress has directly resulted from the public demanding our institutions reflect the communities they serve.

Although progress has been slow, there is one critical area in which there has been virtually no progress at all: the diversity of the people managing institutions’ money. The asset management industry dictates how many major crucial American institutions control their funds. In Maryland alone, asset managers for the state’s 10 largest endowments control more than $30 billion of wealth, a sum that would have major implications for how funds are invested and distributed in our communities.

Asset management is an industry that yields incredible wealth and power, despite being opaque to the general public. Unfortunately, because of entrenched systemic biases, the asset management sector is overwhelmingly White and male — depriving traditionally marginalized groups of a major source of wealth and professional opportunity.

Nationwide, firms owned by women and minorities manage a paltry 1.3 percent of assets in the $69 trillion asset management industry, according to the Knight Foundation. That’s largely because of widely documented racial and gender biases and processes that exclude diverse managers. What’s more, pension funds, colleges, foundations and more have a history of refusing to publicly release diversity data, making it difficult to measure progress and enforce accountability.

To date, many of the same institutions that have publicly committed to increase diversity have failed to extend that commitment to the people who manage their wealth. They should. Not just because it’s the right thing to do, but also because the evidence shows it will help their bottom line.

A wealth of research makes clear that diverse managers perform similarly to or better than their peers. The National Association of Investment Companies, for example, has produced multiple studies showing that diverse managers outperform benchmarks. And a 2020 analysis by Bloomberg revealed that over three years, hedge funds run by minority groups or women had returns almost double those of funds run by White men. If an institution is not fully networking with diverse managers and using their talents, it is missing out on performance.

As delegates in Maryland, we’re pushing for change in our state. We hope Maryland and our pension system can lead in making the asset management industry more diverse. Maryland could adopt a model similar to our neighbors in D.C., for example, where important legislation that would diversify the city’s asset managers is pending before the D.C. Council. All investment consultants and fund managers would be required to submit regular demographic reports and ensure sufficient representation of women, minority groups and people with disabilities. We could also follow the lead of Illinois, currently the only state in the nation that regularly requires similar reporting of all of its public pension plans.

These are simple reforms that will increase transparency and ensure that our state’s investments reflect the diversity and values of our Maryland community — and result in better returns for our retirees. Our partners in philanthropy, such as foundations and large endowments, should publicly release this information as well, and make doing so a core measure of their commitment to diversity and transparency.

When we exclude talented women and people of color from our financial sector, we do so at our peril — we limit our returns and decrease our fund’s potential. It’s time for us to demand more from our institutions and our state. Maryland should lead the way.

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