New York-listed insurance company Prudential Financial has allocated $200 million to private equity funds managed by GPs owned by women and minorities.
When making investment decisions, Prudential will also take into account the diversity of the GP’s portfolio management team and the impact of its investment strategy on diverse populations. It will prioritise early-stage GPs raising capital for their first or second funds.
Prudential hopes this DEI portfolio will result in “equity of opportunity” and “increased assets under management for women and minority-owned investment firms”, Cherrise Cederqvist, DEI portfolio lead and vice-president at Prudential’s asset management arm PGIM Investments, said in a statement.
Prudential cited research indicating that women and minorities manage a tiny proportion of the investment industry’s assets under management, and that gender-diverse fund managers deliver stronger returns than non-gender-diverse teams.
According to the company’s statement, Prudential has an existing track record of investing in later-stage GPs owned or managed by women and minorities. “The company currently oversees nearly $1.2 billion in AUM invested in well-established private equity funds, hedge funds and real estate funds whose management teams have a substantial or majority ownership by an ethnic minority or woman.”
The ownership of fund managers is coming into sharper focus for many investors committed to achieving positive social impact through their portfolios. A 2019 study by the IFC found “female deal partners have about 70 percent more investments in companies with female CEOs than male deal partners”.
Last week, Northwestern Mutual, a Milwaukee-based insurance company, announced investments in two Black- and African American-owned GPs as part of its strategy to invest $100 million in Black, African American and minority-owned businesses. Northwestern Mutual’s executive vice-president Ray Manista stopped short of saying Black-owned GPs are best-placed to invest in Black communities, but said “we see GPs such as Gateway and Clear Vision Fund [the two Black-owned GPs Northwestern Mutual has backed] helping to close this gap”.
US pension funds including the Teachers’ Retirement System of the State of Illinois, the California State Teachers’ Retirement System, the Connecticut Retirement Plans and Trust Funds and others have allocations and programmes for diverse and emerging managers – though none of these pension funds state that their objective is to invest in diverse-owned portfolio companies or create positive social impact.