The Kresge Foundation has pledged to place one-quarter of its U.S. assets or roughly $462.5 million under the management of women- and minority-owned firms by 2025.
Currently, about 15 percent of its $1.85 billion in domestic assets is managed by firms managed by women and minority ownership, senior communications officer W. Kim Heron said.
With the commitment, the Troy-based foundation is the first private foundation to sign onto the Association of Black Foundation Executives’ “Diversity in Foundation Asset Management Pledge.”
New York-based ABFE, which is hosting its annual conference in Detroit Thursday-Saturday, is issuing a challenge for 50 foundations to commit to the same by the end of 2021.
“This is about equity. It’s about accountability. And it’s about better economic outcomes,” said Kresge Vice President and Chief Investment Officer Robert Manilla in a Wednesday announcement of the commitment.
Most foundation investments haven’t earned their spending plus inflation in recent years, he said.
Diversity of thought, background and beliefs leads to better investment decisions and returns by bringing different perspectives to problems and challenges, Manilla said.
“When I think about all the asset classifications we could invest in, it’s massively dominated by whites,” he said.
Manilla said his job is to ensure Kresge’s assets, which currently total $3.7 billion including international investments, exist into perpetuity.
“We truly believe this is the way to do it,” he said, noting that Kresge is bringing the same focus on diversity to its internal investment team.
Asset management firms owned and operated by diverse teams make more accurate decisions and demonstrate equal or better performance than their peers. Yet these firms represent just 1.1 percent of the financial industry’s $71 trillion of assets under management, according to a 2016 report from Bella Research Group and the Knight Foundation, Kresge said in a news release.
“If we can get enough folks to buy in to engaging diverse asset managers because it matters because of (better) performance,” it will serve as a way to foster conversation about diversification in the larger financial services industry, said ABFE President and CEO Susan Taylor Batten.
“The reluctance to face the finance industry’s demographic has stifled its growth and impact,” she said.
Diverse asset managers are very philanthropic themselves, Batten said, noting that engaging them will also help build their wealth and their philanthropy.
Kresge hopes the commitment will encourage other foundations to follow suit, President and CEO Rip Rapson said.
“By committing to the ABFE pledge, we hope to signal to the philanthropic sector that the elevation of diversity, equity, and inclusion cannot be walled off within philanthropy’s programmatic activities but must instead infuse every aspect of our operations.”
But Rapson said the hope is that a shift to awarding more business to women- and minority-owned investment managers will move well beyond philanthropy to include others with large investment decisions, such as universities.
“We can do lots with our little piece of the pie. But there’s a big, complicated world out there. I’m hoping this will be a message for (everyone) out there,” Rapson said.