How to integrate diversity, equity and inclusion into your investment decisions
Embracing diversity, equity and inclusion (DEI) could provide institutional investors with new investment opportunities while helping to deliver on a firm’s overall values and objectives.
DEI has become a central pillar for investors who are seeking to align their portfolios with their overall organisational values. Investors are increasingly embedding DEI into their investment approach to help them achieve long-term sustainable returns while keeping in line with shifting investment trends.
Research shows1 that about a third of women-owned and minority-owned private equity firms are top quartile performers among private equity firms overall. This demonstrates the vital importance of securing investment returns from a range of sources, and means that investors should embrace research, advice and solutions that can help them overcome the challenges of selecting the right DEI investments.
What do we use to define DEI investments?
The manager's firm is at least a third owned by diverse person(s)
The investment committee compromises at least 50% diverse person(s)
Portfolio managers compromise at least 50% diverse person(s)
Six things to look for in DEI managers
1. A dynamic team with experience in the strategy and a strong firm culture
2. Clear strategy that the team has experience executing
3. Strong alignment with LPs through attractive terms
4. An applicable track record (when available)
5. Strong operational due diligence results
6. Positive market references
Common DEI investing challenges
With hundreds of diverse managers in the market today, making a choice can be overwhelming. It requires rigorous sourcing, research and due diligence. Spending time with diverse managers is crucial, as it is with all managers, to supporting strong manager selection.
There are diverse manager options in all private markets strategies today, making it possible to add diversity to whatever strategies you target.
Considerations for integrating DEI into investments
Do your DEI researchIt’s important to understand how organisations address DEI. When we research managers based on DEI considerations, we look at historically underrepresented investment objectives.
Get some advice from a specialistMany investors seek third party advice on all aspects of an investment strategy, including reviewing existing exposures, reviewing and developing policies, and screening and due diligence services.
Investigate the solutions available to youThere are options out there to help you with your DEI strategy. You could decide to fully or partially delegate your DEI investments through a third party fund or create a direct programme. One of the benefits of fully integrated investment solutions is that it helps to alleviate capacity constraints on your internal team in market mapping the DEI space, while helping you seek access to top diverse managers.
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