“Can we mark today as a moment for change?”
– Renae Griffin, GCM Grosvenor
Consortium 2020 was all about change. The event took place amid a global health crisis that is changing how we work, a volatile economic climate altering the investment landscape, and peaceful protests demanding social change. Against this backdrop, Consortium’s mission – advancing diverse and women investment managers – has never been more relevant and important than it is at this moment.
For the first time, Consortium was presented in a virtual environment, and speakers and attendees were up to the challenge of moving online. In traditional Consortium fashion, panelists asked and answered tough questions, raised important issues, and engaged in unfiltered dialogue.
Consortium 2020 was the best-attended in its history with more than 500 participants, and over 200 were first-time attendees.
Attendees represented a mix of firms
More than 300 diverse GPs and a wide range of allocators shared insights, experiences, and advice
Among the LPs and consulting firms at Consortium
Over 75% currently allocate to diverse and women managers
Over 55% have small, emerging, and/or diverse manager programs over $500 million
“This was well done and timely…the panelists were very involved. I think this may have been the best one that I have been to.”
– Consortium 2020 attendee
This year’s Consortium brought to light the “trifecta” of the health, economic, and social crises, and put in perspective their impact on investing with diverse and women managers. Several themes emerged:
- Challenging the biases that exist in our industry, and asking why there hasn’t been more change
- How diverse and women managers gain better access to institutional investors
- Ways that LPs can access diverse and women managers, and the role consultants play
- The impact of COVID-19 on fundraising, communication and due diligence
What’s going on? Why aren’t more LPs leading?
DAMI’s Robert Raben posed an important question simply: He asked “what’s going on?” to a panel of LPs and Consultants who are considered leaders in the space, and he wondered why more LPs aren’t following their lead. Why are there are so many laggards when it comes to investing with diverse and women managers?
Panelists acknowledged the existence of market headwinds such as LPs moving to passive investing, reducing their lineup of managers overall, or a lack of information about diverse managers’ performance. But one panelist pointed out the existence of unconscious and conscious biases, and this theme was pervasive throughout Consortium.
So, how do LPs overcome biases that have been institutionalized across the investment industry? Some organizations have built dedicated diverse manager investment programs and are actively managing diversity within their firms as they recommit to being equitable and inclusive. Many are taking steps to better reflect the make-up of their constituents by implementing changes such as:
- Grow a culture of diverse thought that starts at the top of an organization and is embraced by all
- Provide education on the benefits of diverse investing
- Analyze performance objectively, scientifically, and in a data-driven way
- Look for, monitor, and insist upon diversity among invested managers
LPs collectively acknowledged there is more work to do to overcome what some have called the “fear factor” of investing with managers that are not of the “typical” mold.
“I’m optimistic that we’re going to see great change…but the continued bias that women and people of color can’t perform at the highest levels remains a persistent problem.”
– Robert Raben, DAMI, The Raben Group
GP Bootcamp Coaching Tips
LPs, consultants, and GPs alike delivered practical advice and shared heartfelt experiences to provide a roadmap to how GPs may gain better access to institutional investors. One consultant’s advice:
- Stay focused on delivering results – don’t lose sight of what’s important
- Develop relationships for the future, today – it’s important to be ready for changes
- Be a solutions provider – understand investors’ priorities and communicate how your strategy is aligned
Additional real-world advice:
- The most important item LPs and consultants are looking for is the manager’s edge or their strategy’s edge
- The manager should research the LP’s strategy and convey how they are aligned with it
- The GP must perfect their messaging and speak with conviction when presenting
GPs’ non-performance factors are also critical: organizational stability, team dynamics, operations, back office support, communications, and cybersecurity. GPs are well-served to ensure all of these boxes (and more) are ticked and ready for review.
“I appreciated the virtual conference and would attend again… and hope you resume this as an in person event when it is safe to host large scale events.”
– Consortium 2020 attendee
LPs speak up on what it takes
How do LPs achieve a talent funnel that looks representative of the community? What are some of the best practices?
- Align resources to the mission of diversity and inclusion efforts, including hiring, investing, and choosing vendors
- Include diversity information in all investment language, including investment policy statements, recommendations to board, and RFPs
- Share diverse managers’ performance data with board; bring managers to board meetings
- Share results with other investors on how the organization is achieving diversity
- Require reporting from consultants (see “Working With Consultants” below for more)
The watchword is still “uncertainty”
An LP noted that his firm is accustomed to risk, but not to the high level of uncertainty that exists in today’s environment. The impact of COVID-19 on the investment (and every) industry is deep and far-reaching. Many shared their perspectives on the current environment, ranging from “business as usual,” to “everything has changed.”
From an investment perspective, the virus has affected asset valuations in different ways, so opinions tended to vary. In general, it was agreed upon that during times of turmoil, sticking to asset allocation is crucial. Some LPs shared thoughts about their strategies:
- This is a good environment to look for alpha generators
- Investments will stay “close to home” relative to their benchmarks
- This is a key time to be in-market
COVID-19 created uncertainty for people and communications as well. In addition to the obvious health concerns, all firms must mitigate the business risks associated with communications and operations. This can be done through a collaborative culture, use of technology, and properly prioritizing. Communications with external stakeholders must balance cadence, tone, and messaging. If possible, a manager should provide data on how their portfolio has performed in prior downturns and what may be expected as we move toward recovery.
Working with Consultants
Consortium highlighted the significant role of consultants in advancing the industry. LPs stressed how important it is that consultants make organization-wide commitments toward diversity, consistent with how LPs are doing at their own firms.
LPs recognized that it’s up to them to hold their consultants accountable, and pointed out ways that they can do so; one in particular focused on annual reporting on three factors:
- How many diverse managers has their consultant met with?
- How many have they recommended?
- How many have they hired?
These and other reporting functions allow LPs to better analyze how their pipeline of managers is sourced, and assess if their consultant’s vision is in-line with theirs.
NEPC’s Sam Austin: “We are data-driven in our approach; we want to be accountable in our practices, transparent in reporting, and responsive to the diverse manager community.”
Consortium 2020 featured four distinct sessions: LP Workshops, General Session, LP Intensive, and GP Bootcamp. View the full schedule here: http://consortium.gcmgrosvenor.com/schedule/
LP Workshops
Eight workshops on June 4 gave diverse and women managers access to some of the top LPs who invest in this space.
General Session
On June 11, members of the GCM Grosvenor executive team welcomed all participants to Consortium, before hosting a panel of top LPs in the diverse and women manager space.
LP Intensive
This peer-to-peer discussion allowed LPs and consultants to have open dialogue about their programs and the evolving role of the consultant in the diverse and women manager industry.
GP Bootcamps
GPs received real-world and real-time training and advice on how to position their strategies, how to present their firms, and ultimately, how to gain access with institutional investors.
DISCLAIMER
Investments in alternatives are speculative and involve substantial risk, including strategy risks, manager risks, market risks, and structural/operational risks, and may result in the possible loss of your entire investment. Past performance is not necessarily indicative of future results. The views expressed are for informational purposes only and are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities by GCM Grosvenor. All expressions of opinion are subject to change without notice in reaction to shifting market, economic, or political conditions.
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