https://www.menendez.senate.gov/newsroom/press/menendez-leads-push-for-big-corporations-to-improve-diversity-among-corporate-pension-fund-managers

Press Release

U.S. Senator Bob Menendez (D-N.J.) led a group of colleagues including Sens. Elizabeth Warren (D-Mass.), Alex Padilla (D-Calif.), Tim Kaine (D-Va.), and John Hickenlooper (D-Col.) in sending letters to 25 large companies requesting information about the diversity among asset managers of their pension plans. The group of senators questioned the companies, who control some of the largest corporate pension plans in the U.S., regarding their practices in seeking, selecting, and retaining diverse-owned asset management firms to manage their pension and or treasury funds.

"Women and people of color are dramatically underrepresented in the field of asset management. Less than 1% of the $70 trillion in global financial assets under management are managed by woman or minority-owned firms," wrote the senators to heads of 25 major companies requesting information on the diversity of asset managers overseeing their pension plans. "This is a serious problem for the industry, investors, and the country as there is a wealth of data showing that greater diversity leads to greater profitability. A study by the National Association of Investment Companies showed that diverse-owned private equity firms exceeded industry averages in virtually every performance indicator."

Across the asset management industry, the senior leadership is overwhelmingly white and male -- 83.7% of executives are white and 74.6% are male.

"Despite the fact that millions of Americans rely on returns from corporate pensions for retirement and wealth building, there is very little transparency about who is managing these funds. In order to foster that transparency, we urge you to provide detailed information on your corporate practices in seeking, selecting and retaining diverse-owned asset management firms to manage your pension and treasury funds," the senators added before asking a detailed list of questions on their practices.

The letter is supported by the Diverse Asset Managers Initiative -- an effort to bolster racial and gender representation in the asset management industry.

"We applaud this new step to push companies to be transparent about their use -- or more accurately, their lack of use -- of diverse money managers. For far too long, corporations have shielded information about the diversity of the people managing their pension funds. But it's abundantly clear that those managers are overwhelmingly white and male. Companies just don't want to put the numbers on paper for public view," said Robert Raben, Executive Director and founder of the Diverse Asset Managers Initiative.

Last year, Sen. Menendez urged the Securities and Exchange Commission (SEC) Chair to expeditiously adopt recommendations to promote greater transparency and diversity among asset managers and led an effort to push the Federal Retirement Thrift Investment Board to create opportunities for federal workers to invest in funds run by diverse asset managers. Sen. Menendez is the author of the Improving Corporate Governance Through Diversity Act of 2021, legislation that would address shortcomings in the U.S. Securities and Exchange Commission's (SEC) diversity disclosure rule by requiring public companies to disclose information related to the racial, gender, ethnic makeup and veteran status of corporate boards and senior management. For years, he led a corporate diversity survey of Fortune 100 companies which found that despite diversity and inclusion having made their way into the everyday lexicon of America's top performing companies, many companies have not paired their words with concrete actions to improve diversity among top executives and corporate boards.

Copies of this letter were sent to 3M Investment Management Corporation; Boeing Company Employee Retirement Plans; Citigroup Pension Plan; Delta Air Lines Pension Plan; Dow Employees Pension Plan Trust; Exelon Pension Plan; ExxonMobil Investment Management, Inc.; FedEx Employees Pension Plan; Ford Motor Company Defined Benefit Master Trust; General Electric Pension Plan; General Motors Investment Management Corporation; Halliburton Company Pension; Honeywell International Pension Plan; IBM Retirement Funds; Johnson & Johnson Savings Plan Trust; Lockheed Martin Investment Management Company; Marsh & McLennan Companies Retirement Plan; MIO Partners; Northrop Grumman Pension Plan; PG&E Corp RSP For Union-Represented Employees; Raytheon Master Pension Trust; SBC Master Pension Trust; UPS Plan Investments Group; Verizon Investment Management Corporation and the Walt Disney Company Retirement Plan Master Trust.

A sample of the letters can be downloaded HERE and full text can be found below.

Dear XX,

We are writing to respectfully request information on the diversity of your corporate pension and treasury fund management.

Women and people of color are dramatically underrepresented in the field of asset management. Less than 1% of the $70 trillion in global financial assets under management are managed by woman or minority-owned firms. Women and people of color are also extremely underrepresented at the board and senior management levels at asset management firms. Across the industry, the senior leadership level is overwhelmingly white and male; 83.7% of executives are white and 74.6% are male. The investment consultant community exhibits similar characteristics.

This is a serious problem for the industry, investors, and the country as there is a wealth of data showing that greater diversity leads to greater profitability. A study by the National Association of Investment Companies showed that diverse-owned private equity firms exceeded industry averages in virtually every performance indicator.

Additionally, a July 2021 report from BoardReady showed that companies with at least 30% of their board seats filled by non-white Executives experienced year over year revenue growth of 1.2% in 2020 despite the pandemic. Meanwhile, companies with less than 20% of their board seats filled by diverse executives experienced 8.3% revenue losses.

Despite the fact that millions of Americans rely on returns from corporate pensions for retirement and wealth building, there is very little transparency about who is managing these funds. In order to foster that transparency, we urge you to provide detailed information on your corporate practices in seeking, selecting and retaining diverse-owned asset management firms to manage your pension and treasury funds. Specifically, we request answers to the following questions to allow an accurate assessment of your corporation's efforts:

Does your corporation's pension fund have a publicly available equal opportunity statement pertaining to the selection of external asset managers?
If no, why not?
If yes, please provide that statement.
What commitments has your corporate pension fund made to increase opportunities for women and minority-owned asset management firms?
Please provide details on progress made to date.
Has your corporate pension fund conducted reviews to examine whether existing policies and practices impact the participation of smaller and/or newer firms?
If no, why not?
If yes, please specify when and articulate the findings.
Has your corporate pension fund conducted targeted outreach to women and minority-owned asset management firms about investment opportunities and the selection process?
If yes, please provide details on outreach and results.
Does your corporate pension fund have established priorities and expectations for investment staff and/or consultants to seek diverse asset managers?
Please describe your selection process for external asset managers.
Does it contain a diversity component? If not, why? If yes, has it been successful?
Please provide data on your utilization of women-and minority-owned firms. How much of your corporate pension assets are managed by:
Women-owned firms?
Firms in which women own 25% or more of the firm?
Minority-owned firms?
Firms in which minorities own 25% or more of the firm?
Minority women-owned firms?
Firms in which minority women own 25% or more of the firm?
For each of the categories in a-f, what percent of total assets under management does this represent?
Does your firm utilize external managers for investment of non-pension fund assets/capital? If yes, please provide the same data for such assets/capital as requested above.
For the purposes of this inquiry, please limit your answers on ownership to asset management firms incorporated in the United States.

Thank you for your prompt attention to this matter. We respectfully request your responses by Monday, July 11. Please contact Alfie Feder (Alfie_feder@menendez.senate.gov) if you have questions.

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