Morgan Stanley Survey: Pension Funds Are Leading the Way in Diversity-Based Investments, Yet Perceived Financial Trade-Off Creates Hurdles for Many Asset Owners
October 20 2021 - 11:00AM
Business Wire
- 56% of asset owners agree that they must choose between
financial gains and incorporating diversity into their investment
decisions, revealing there may be deep-seated skepticism about
diverse external managers yielding strong returns
- Morgan Stanley introduces Diversity Playbook for Asset Owners
to help drive change
According to a new report and survey released by Morgan Stanley,
while a large majority of pension funds say incorporating gender
and racial diversity into investment decisions can be financially
beneficial, more than half of asset owners broadly say they believe
they must choose between financial gains and a diversity-based
approach. This disparity suggests that many asset owners remain
sceptical of the financial ROI of diversity, with the exception of
public pension funds who are setting the standard for action,
according to the survey data.
To better understand how asset owners incorporate diversity into
their investment priorities and selection of external managers,
Morgan Stanley conducted an inaugural poll of large U.S. asset
owners and facilitated supplemental interviews with senior leaders
of pension funds.1
“Today we released findings that shed light on a consequential
misconception that still exists among asset owners - that
incorporating diversity into their investment decisions comes at
the expense of returns,” said Carla Harris, Vice Chairman of Morgan
Stanley and Managing Director of the Multicultural Client Strategy
Group. “This report is part of Morgan Stanley’s strategy to
increase equality in the investing landscape and hopefully
encourage more asset owners to recognize the benefits of a
diversity-based investment approach.”
The findings reveal four key insights among asset owners:
Diversity is a top priority for investment decisions.
- 89% of asset owners say that the diversity of external managers
specifically is important or a top priority
- 67% saying their organization has a policy that incorporates
diversity as part of an ESG requirement for making investment
decisions
Perceived financial trade-off presents a hurdle.
- 56% of asset owners agree that they must choose between
financial gains and incorporating diversity into their investment
decisions
- There is a sizable perception gap by race and ethnicity: 70% of
white asset owners agree compared to just 35% of multicultural
asset owners
Public pension funds are leading the way.
- 63% of public pension fund asset owners say their organization
always includes questions about diversity in its due diligence
processes when deciding whether to invest with an external manager,
compared with 30% of other asset owners
- 47% of public pension fund asset owners say the diversity of
investment teams has always been a priority for their organization,
compared to 7% of other asset owners
Need for stronger accountability.
- 43% of asset owners use a formal measurement tracking system to
keep tabs on their external managers’ progress on their D&I
targets
- 38% of asset owners say they always ask questions about
diversity in their due diligence processes when deciding whether to
invest with an external manager, with another 49% saying they
sometimes ask
“Continuing to share data-backed evidence of the financial
benefits of a diversity-based approach with the broader asset owner
industry will help to dispel inaccurate beliefs about investing
with a D&I mindset and motivate more progress,” said Seema
Hingorani, Managing Director, Morgan Stanley Investment Management.
“I hope that this report will help to inspire more asset owners to
re-evaluate their standardization practices to formally track
external managers’ progress on meeting diversity targets.”
The survey findings are featured in Asset Owners and Investing
in Diversity: Intention versus Action, Morgan Stanley’s first asset
owner survey and report to better understand their perspectives on
the role of diversity in their investment decisions and choice of
external managers. The report introduces the Morgan Stanley
Playbook for Asset Owners that outlines prescriptive steps that the
industry can take to showcase the tangible benefits of a
diversity-based investment approach.
The survey was conducted by Brunswick Group between January 12
and April 28, 2021 in the U.S. and interviewed 63 senior investment
decision-makers primarily from public pension funds, college or
university endowments, insurance companies, and investment
consulting firms. To qualify for the survey, respondents must work
for organizations that have at least $500 million in assets under
management (AUM). Supplemental interviews with senior leaders of
pension funds were conducted from June 15 through July 16, 2021 in
the U.S.
The full report and survey results can be viewed online
here.
About Morgan Stanley
Morgan Stanley (NYSE: MS) is a leading global financial services
firm providing investment banking, securities, wealth management
and investment management services. With offices in more than 41
countries, the Firm's employees serve clients worldwide including
corporations, governments, institutions and individuals. For more
information about Morgan Stanley, please visit
www.morganstanley.com.
Morgan Stanley Investment Management is the asset management
division of Morgan Stanley.
ESG Strategies that incorporate impact investing and/or
Environmental, Social and Governance (ESG) factors could result in
relative investment performance deviating from other strategies or
broad market benchmarks, depending on whether such sectors or
investments are in or out of favor in the market. As a result,
there is no assurance ESG strategies could result in more favorable
investment performance.
CRC #3873877
1 Survey was conducted online and via telephone interviews with
senior investment decision makes primarily from public pension
funds, college or university endowments, insurance companies and
investment consulting firms.
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Media Relations: Katherine Stueber,
Katherine.stueber@morganstanley.com
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