Institutional investors are increasingly interested in data on the diversity of fund managers.
After launching a diversity rating product in late 2019, Lenox Park Solutions, a company that collates, analyzes and compares diversity data from asset managers for institutional investors, now has a stable customer base with assets totaling 5, $5 trillion, according to Jason Lamin, its New York-CEO and co-founder.
Lenox Park collects data on a company’s ownership, management, board, workforce, and other areas to get a score on how well a company is performing on ethnic diversity and gender. “We consider this a FICO score,” Lamin said. Lenox Park then compares the score to illustrate a company’s performance against its peers.
The company has a response rate of about 80% from businesses and now has about 2,200 businesses on its platform, Lamin said. “Managers aren’t forced, but they certainly feel compelled to align with something that our clients have rated as very interesting.”
One of these customers is the 70.6 billion Maryland State Pension and Retirement SystemBaltimore.
Andrew C. Palmer, the system’s chief investment officer, said manager diversity had been a focus of the fund for decades, but it wanted to do more. “We think we’ve done what we can from a manager hiring and ownership perspective,” Palmer said. “How do we take the next step? That’s why we’re getting outside resources to address it because we think we’re efficient, but we’re limited in our ability to become more efficient.”
Maryland’s system isn’t just trying to tick a box when it comes to hiring various managers, said Martin Noven, its executive director. “If we’re really trying to improve ROI and make real change, we need to dig deeper and have a stronger conversation,” he added.
Institutional investors want to see hard data on diversity, Lamin said. “The rhetoric has been done; the stories have been done; we can go to page 34 of your slideshow and read your four pages on DCI and your principles, we get it,” he said. “But what they want to see now is tangible performance (around diversity), targets for improvement.”
Mr. Lamin added, “There isn’t an organization on this planet in 2022 that isn’t solving its biggest challenges with data. If you really want to solve an IED problem, you have to measure it.”