Minority-Owned Asset Managers Oversee Less Than 1% of Market: GAO

GAO identified four practices that could be used as part of federal entities' asset manager selection processes to help increase opportunities for highly qualified, diverse-owned firms that do not require targets or allocations for minority and women- owned (MWO) asset management firms or changes in performance standards. They are: 

• demonstrating a commitment from top leadership at federal entities to increase opportunities;

• reviewing investment policies and practices to remove barriers that may unfairly limit the participation of smaller, newer firms;

• conducting outreach to inform MWO asset firms about opportunities and federal selection processes; and

• explicitly communicating priorities and expectations about inclusive practices to investment staff and consultants and ensuring that those expectations are met. 

Rep. Maxine Waters, D-Calif., ranking member of the House Committee on Financial Services, said in a statement after the report was released that the "tiny percentage" of assets managed by minority-owned firms "reflects an alarming opportunity gap within the highly concentrated asset management industry, particularly in light of the growing body of research demonstrating that diverse-owned asset managers perform as well, if not better, than their majority-owned peers."

While state, local and private pension plans and other institutional investors have started to use more diverse asset firms, Waters continued, "the federal government has largely failed to address and remedy the barriers faced by MWO asset firms to promote greater participation."

Waters applauded the federal entities that have "acknowledged their shortcomings and committed to working to improve equal opportunities by incorporating these practices," adding, however, that she's "deeply disappointed" that the Federal Retirement Thrift Investment Board, which administers the Thrift Savings Plan, disagreed with GAO's recommendations.

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