Amay Tewari, Senior Photographer

More than a year since Yale Chief Investments Officer David Swensen GRD ’80 demanded that Yale’s money managers diversify their firms or risk Yale pulling its assets, the University has not published the metrics it is using to assess firms or provided an update on its follow-through.

Swensen’s letter, released in October 2020, came in the wake of racial justice protests and social turbulence 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 firms the University uses to manage its funds. Though it did not dictate metrics to measure the firms’ progress towards diversifying their ranks, the letter stipulated that Yale would administer a yearly survey of the number of “diverse professionals” at various ranks in firms’ workforces. The YIO planned to assess these firms’ progress in “hiring, training, mentoring and retaining women and minority” managers, Swensen wrote. But in May, the legendary investor died. Since his passing, it is unclear whether Yale has followed through on the aims he outlined.

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

University Spokesperson Karen Peart told the News on behalf of the Investments Office that “matters of diversity, equity, and inclusion continue to be important to the Investments Office,” adding the office would focus on building a “more diverse set of investment partners” and would provide an update “when appropriate.” 

Peart did not directly respond to questions about what metrics the University was assessing to show progress. Peart could not respond late Wednesday to a follow-up question on whether Yale had administered a second yearly 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. Women CIOs are absolutely on a par with the men in terms of investment performance. We have to work our way down — if the women are just as good as the men at the top, and often better, then why aren’t there more women?”

The Oct. 2020 letter was addressed to the around 70 U.S. firms that Yale contracts to manage its investments. In the letter, Swensen suggested “a rethinking” of the firms’ recruitment strategies.

“Many of you report that the pools from which you recruit are not diverse,” he wrote. “Why not hire directly from college campuses? Colleges and universities are richly 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 investment management.”

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

But one professor said that the intervening years had seen a strong growth in diversity in the industry.

Professor of Accounting at the Yale School of Management Frank Zhang told the News that the finance space is seeing a “huge increase” of diversity.

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

Looking from an empirical perspective, Zhang said that greater diversity on corporate 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 is from the same background, they might overlook certain important details.

Zhang went on to cite studies which show that female managers perform better as managers in finance, a historically male-dominated field. He clarified that these statements apply to investment specifically, and more research is needed to explore the performance effects of diversity in the endowment space.

“Because the Yale endowment is such a big institution, other endowments follow the model,” 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’s website are women. The majority of directors are white.

Skorina told the News that if Yale were to have “an even playing field” for men and women, Swensen “would have needed to have a fair number of solid women five years ago,” so that these managers could be trained and gain experience. He pointed out that Lisa Howie, who was a director in the Investments Office and who Skorina said was “the one that 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’s Matt Mendelsohn going to do?” Skorina said. “Is he going to follow in the spirit and take concrete action? I don’t know yet. We’ll have to see. We can’t judge now.”

Mendelsohn, who was selected for his role by a panel including 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 politics. In 2020, former Rep. Joseph Kennedy and Rep. Emanuel Cleaver conducted an inquiry into diversity among the managers of the U.S.’s 25 largest university endowments. The congressmen released their results in an Oct. 2020 report, published six days after Swensen sent his letter, that included a set of recommendations for colleges and universities.

The last of Kennedy and Cleaver’s recommendations asked the colleges — which included Yale — to publicly disclose their progress and efforts.

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

In response to the announcement of Kennedy and Cleaver’s inquiry — and a list of questions that accompanied it —  Harvard University released a set of answers to the questions. Officials from the Harvard Management Company wrote that 27 percent of Harvard’s active manager relationships are with “majority diverse” external managers. The document defined “majority diverse” as majority owned by either women or those of racial or ethnic majorities.

Yale did not publish a public response to the inquiry.

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