Diversity is now a factor in determining which pension fund managers are most likely to achieve superior risk-adjusted returns for New York City, the office of the comptroller said.
The city’s five pension systems, which manage a total of almost $160 billion, will systematically ask current and prospective money managers about the ethnic, sexual-orientation and gender diversity of their investment professionals.
“Diversity is not merely a social value, it has strong economic value for our investments,” Comptroller Stringer said in a press release. “We want the companies in which we invest to harness the economic and financial benefits of diversity. Now we’re going to ask the people who help us choose where to invest our money to show us that they walk the talk when it comes to diversity.”
Citing statistics from the Equal Employment Opportunity Commission, the comptroller’s office said 83 percent of portfolio managers in the US are white. But research “demonstrates the value of diversity in promoting long-term sustainable business practices and investment value and lowering risk,” it said, noting as just one example a 2015 McKinsey study that found companies in the top quartile of racial/ethnic and gender diversity were 35 percent more likely to have above median financial returns.
Consultants who help choose managers for the funds will also be required to consider diversity, the office said.
Separately, the comptroller will push the state legislature to adopt its own rule requiring financial advisers and stockbrokers to disclose whether they are obligated to put their clients’ interests first, a Wall Street Journal report said.
This fiduciary duty, which applies to investment advisers, is a standard the US administration is seeking to apply to brokers generally.
“There’s so much at stake that we can’t wait for Washington to act,” Stringer said in an interview, according to the Journal.
