A year since Swensen told fund managers to diversify businesses, Yale remains silent on progress

Amid management turnover at Yale’s office of investments, it’s unclear just how much progress has been made in Yale’s efforts to get companies to diversify.

Staff journalists

Amay Tewari, senior photographer

More than a year since Yale Chief Investment Officer David Swensen GRD ’80 demanded that Yale fund managers diversify their businesses or risk Yale withdrawing its assets, the University has not released the measures it uses to assess companies or provide updates on its monitoring. by.

Swensen’s letter, published in October 2020, came in the wake of racial justice protests and social turmoil that defined the summer of 2020. He wrote to take a “more systematic approach” to addressing the lack of women and racial minorities in the asset management industry. . The letter outlined a goal of diversification in the businesses the University uses to manage its funds. While it did not dictate metrics to measure the companies’ progress toward diversifying their ranks, the letter did state that Yale would administer an annual survey of the number of “diverse professionals” at various ranks in the companies’ workforces. The YIO planned to assess the progress of these companies in “hiring, training, mentoring and retaining women and minorities,” Swensen wrote. But in May, the legendary investor passed away. Since his death, it is unclear whether Yale has pursued the goals he set out.

“Our goal is a level of diversity in investment management companies that reflects the diversity of the world we live in,” Swensen wrote. “True diversity remains elusive, giving investors like Yale and your company the opportunity to drive change.”

University spokeswoman Karen Peart told The News on behalf of the Investment Office that “issues of diversity, equity and inclusion continue to be important to the Investment Office,” adding that the office would focus on creating a “more diverse set of investment partners” and provide an update “as appropriate”.

Peart did not respond directly to questions about the metrics the University was evaluating to show progress. Peart could not answer a follow-up question Wednesday night about whether Yale administered a second annual survey in October.

“Finance and asset management is still a man’s world,” Charles Skorina, an investment executive recruiter, told The News. “We’re not going to see much happen until the next generation. Female CIOs are absolutely on par with men in terms of investment performance. We have to work our way down – if women are as good as men at the top, and often better, then why aren’t there more women?

The October 2020 letter was addressed to the roughly 70 U.S. companies that Yale hires to manage its investments. In the letter, Swensen suggested “rethinking” companies’ recruiting strategies.

“Many of you are reporting that the pools you are recruiting from are not diverse,” he wrote. “Why not hire directly on university campuses? Colleges and universities are very diverse. Many students have little knowledge of career options outside of investment banking and consulting. You would be doing a great service by introducing them to the fascinating profession of portfolio management.

A 2017 Knight Foundation study reported that in 2017, women and minority-owned businesses accounted for only about 1% of assets under management.

But one professor said the middle years had seen strong growth in diversity in the industry.

Yale School of Management accounting professor Frank Zhang told the News that the financial space is seeing a “huge increase” in diversity.

“There’s more demand for diversity and inclusion,” Zhang said. “So you see more female managers and non-white managers.”

From an empirical perspective, Zhang said that more diversity on boards leads to better performance. A variety of perspectives and experiences on a board reduces the risk of major mistakes, according to Zhang. He said that if everyone came from the same background, they might overlook some important details.

Zhang went on to cite studies that show female managers do better as managers in finance, a field historically dominated by men. He clarified that these statements apply specifically to investing and that further research is needed to explore the effects of diversity on performance in the endowment space.

“Because the Yale endowment is such a large institution, other endowments are following the pattern,” Zhang said. “If Yale does something, others will follow.”

Skorina noted that diversity is also an issue within Yale’s investment office. Six of the 23 investment professionals listed on the Yale Investment Office website are women. The majority of directors are white.

Skorina told the News that if Yale was going to have “a level playing field” for men and women, Swensen “would have needed to have a good number of strong women five years ago” so those managers could be trained and gain experience. He pointed out that Lisa Howie, who was director of the investment office and who Skorina said was “the one who seemed to be closest” to Swensen’s successor, CIO Matthew Mendelsohn ’07, left the university when she took a job at Smith College. in April.

“The next question is what is Matt Mendelsohn going to do?” Skorina said. “Will he follow the spirit and take action? I do not know yet. We will have to see. We cannot judge now.

Mendelsohn, who was selected for his role by a panel that included only one woman, will now take on the challenge of diversifying the Yale Investments Office.

The issue of diversity in asset management has permeated national policies. In 2020, former Representative Joseph Kennedy and Representative Emanuel Cleaver conducted a survey of diversity among the managers of the 25 largest college foundations in the United States. Members of Congress released their findings in an October 2020 report, released six days after Swensen sent his letter, which included a set of recommendations for colleges and universities.

The last of Kennedy and Cleaver’s recommendations called for colleges — including Yale — to publicly disclose their progress and efforts.

“Universities should include information about diversity and inclusion efforts, including assets allocated to various managers, in addition to other regularly disclosed endowment information,” the representatives wrote. “Transparency invites accountability, can help reduce barriers to adoption at other institutions, and contributes to industry data and/or research that benefits all participants.”

In response to Kennedy and Cleaver’s announcement of the investigation—and an accompanying list of questions—Harvard University released a set of answers to questions. Harvard Management Company officials wrote that 27% of Harvard’s active management relationships are with “predominantly diverse” external managers. The document defined the “diverse majority” as belonging predominantly to women or to racial or ethnic majorities.

Yale has not released a public response to the inquiry.

The University’s endowment was recently valued at $42.3 billion.


Carter Dewees covers Yale College Council and student government as an associate reporter. He is a freshman political science major and a Fellow of Saybrook College.

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