The Diversity Project and New Financial have identified the the key barriers to greater diversity in portfolio management, topped off by the 'meritocracy myth'. The report highlights emerging good practice as diversity moves up the agenda, but calls for industry collaboration to set standards.
City Hive view
While the report notes that diversity if gaining in both attention and traction, with the evidence of the financial benefits from diversity of thought and approach - improved decision making, idea generation, and avoiding groupthink - there is much ground to make up in the UK context. Just 4% of UK fund assets being run exclusively by women, vs 85% exclusively by men. Other forms of diversity such as ethnicity and education were also extremely low.
The pressure is increasing from the regulatory and client side to improve diversity (and, we'd add, the need to attract the right talent). This is leading to changing HR policies, but that will not solve the bigger issues without addressing the pipeline and organisational culture.
There is a need to increase the talent pool by casting off subjective bias and looking in new places. The characteristics of a good portfolio manager that the research identified such as being numerate and analytical are objective and broad. And yet the lack of diversity in the industry is clear.
The report rightly notes the headwinds facing the industry and perhaps there is a temptation to see diversity as a lower priority issue. However, to effectively face the technology, regulatory and other changes, the industry must be in a strong and evolving position to attract and retain talent and innovation.
- The top five barriers are identified, headed by the ‘meritocracy myth’; that if you work hard you will prevail. This is compounded by line manager’s attitude.
- A lack of opportunities is attributed to a low turnover of portfolio managers and a failure to widen recruitment approaches and searches. And the issue of the loss of performance continuity due to absence is noted – one that disproportionately affects women and can even affect career choices, leading to self-selection out of the industry.
- The top five calls to action for the industry largely relate to HR practices – broadening the search for talent, ensuring internal HR policies support changing working practices and providing support for potential female leaders.
- However, while these are an important start, will not be sufficient to address the issue. Collaboration by industry is needed to help set appropriate standards and a catalyst sought to advance changes.
Image (edited) from page 185 of 'Journal of comparative neurology' (1913)