A group of UK asset owners have signed a new Diversity Charter, inviting others to join them to tackle a lack of diversity across the fund management industry, with pensions minister Guy Opperman saying asset managers should be more representative of savers.

Some of the largest pension schemes have formed the Asset Owner Diversity Working Group. It includes representatives from Brunel, Nest, RPMI Railpen, West Midlands Pension Fund, Lothian Pension Fund, and London CIV, with more than £125bn in combined assets under management.

Other pension funds and organisations not currently in the steering group have already pre-declared their support and have signed the Diversity Charter, including Avon Pension Fund, Barnett Waddingham, Church of England Pension Board, Coal Pension Trustees Investment, Cornwall Pension Fund, Environment Agency Pension Fund, LCP, LGPS Central Limited, Local Pensions Partnership Investments, Redington and Willis Towers Watson, together representing £1.08tn in assets under management.

 
The announcement of the new charter follows a consultation on gender and ethnic diversity for listed companies by the Financial Conduct Authority last week, with rules due to come in later this year.
 

    

Signatories to the Diversity Charter are committing to take account of diversity and inclusion records from fund managers when appointing managers and reviewing this annually for incumbents. Managers wanting to work with these funds will have to disclose information on how they are tackling diversity and inclusion within their workforce.

 

"A key aim of the group was to create standardisation to improve disclosure," the group said. The charter questionnaire seeks to identify how managers look at diversity and inclusion across industry perception, recruitment, culture, promotion and leadership.

 

Helen Price, co-chair of the group and stewardship manager at Brunel, said information on race, age, ethnicity, sexuality and socio-economic backgrounds is not being consistently collected in a way that equips the industry to identify barriers and make meaningful progress.

“We expect fund managers to manage diversity as a material investment issue, but we question how well they’re doing this if they’re doing little to address it in their own organisations," she said.

By requesting data from managers, they "will have to confront poor performance and begin taking much needed action on diversity", Price added.
 

David Hickey, a portfolio manager at Lothian who also co-chairs the group, added: “It is reasonable for pension scheme members to expect their money to be run by a cross-section of investment managers that reflect the diversity in the scheme. At the moment this is not the case across pension schemes in the UK. Fund management front offices are currently dominated by white men, and we are not benefitting from the talent pools available in the population – the dominance of a single group suggests a problem with hiring and with culture."

Using the 'kink in the hosepipe' phrase coined by mallowstreet co-founder Dawid Konotey-Ahulu, he continued: “We are hoping that the diversity charter will allow us to look under the bonnet of firms’ policies and practices and find out what is causing the kinks in the hosepipe, which are particularly extreme with regards to black talent.”

 

The new industry charter has the support of government, with pensions minister Guy Opperman saying: “We need asset managers to be more representative of the savers they represent. It is good to see pension schemes taking a lead in developing this charter and committing to work with the wider investment industry to improve diversity. I encourage all pension schemes to sign up.”

 

Support has also been provided by consultancies Aon, Barnett Waddingham, bfinance, Buck, Hymans, LCP, Mercer, Redington and Willis Towers Watson.

 

In a statement issued from the wider group, they said that agreeing a common baseline and getting consistency and agreement of key D&I information required by investment consultants will help create momentum and focus across the asset management community.

“We recognise that not all firms are going to be able to complete the whole questionnaire at the outset. The idea is for us to outline the direction of travel. We are not looking to make judgments based on a single snapshot, nor to benchmark asset managers against each other, but to understand each firm’s strategy, policies and approach to D&I and assess their progress against that as broadly as possible, taking a long term view and holding firms to account for ongoing progress,” they said.

The steering group noted that the charter is a multi-year project and that the questionnaire will be refined over time to build in findings from initiatives such as the Socio-Economic Taskforce, with a progress report due one year from launch to highlight developing best practice and to equip signatories with ongoing engagement.

The charter, a toolkit and the questionnaire are available on the website of the Diversity Project: