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NEWSLETTER

Diversity proven to deliver

The asset management industry traditionally marks International Women’s Day with a slew of reports on how diverse investment teams perform better than their traditional counterparts, and this year was no different.

Analysis from consultant WTW reports that an investment team with a greater level of diversity leads to better investment outcomes. Data show that investment teams in the top quartile of gender diversity outperform the bottom quartile by 45 basis points a year in terms of net excess returns.

It would make sense then for asset managers to have taken steps to redress the imbalance in their investment teams. But research from fellow consultant Mercer finds this is far from the case.

Of 21,452 unique individuals making key decisions for at least one investment strategy, 13.7 per cent were female, compared to 12 per cent in December 2019.

Which Mercers says represents a “disappointingly small” increase of just 0.6 per cent annually over the three years.

Chris Redmond, Head of Manager Research at WTW, agrees and says that while “undoubted progress” has been made on diversity by many asset managers in recent years, “the pace of change at an industry level is still slow and disappointing”.

Refusing to be deterred however, Redmond says he is hopeful that the “truly extraordinary investment performance benefits linked to superior diversity can serve as a catalyst for acceleration”, and he also calls on asset managers to look at the “inherent and acquired traits of diversity such as disability, sexual orientation, socioeconomic diversity and neurodiversity”.

All very laudable but I shan’t hold my breath.

Elsewhere, there have been more rapid advances but those relate to the time taken to settle trades.

US financial regulator the Securities and Exchange Commission (SEC) has adopted rule changes that shorten the standard settlement cycle for US stocks from two days to one.

Investment manager Truss Edge welcomes the news and tells us the reforms reflect a desire by the SEC to reduce the various credit, market and liquidity risks that have been highlighted in changed dealing volumes over the last five years.

“The changes mean that investment firms will need to automate their trade processes to ensure that trades are captured in a timely and accurate manner, as specified by the regulator,” the firm says.

Finally we hear that 2023 will be the year custody makes its presence felt in the world of digital assets.

Kam Patel, CEO of Custodiex, which stores crypto assets, says financial institutions adopting crypto assets face what he calls a trilemma of ensuring security, speed, and scalability.

“One of these is always had to be sacrificed in traditional Custody-enablement solutions. The market for Custody solutions is being driven in response to regulatory and technological changes, market infrastructure developments and enhanced risk awareness.”

Patel argues: “The existing market perceptions of trust in digital assets, cryptocurrency and stablecoins can and will be restored with new rules of engagement like segregating trade execution and custody, use of institutional-grade custodial solutions, proof of reserves, and auditing.”

ETF Express is collaborating with IMpower FundForum, Europe’s largest asset and wealth management event, on its ETF sessions this summer in Monte Carlo.

To view the current agenda please click here. 

Delegates can receive a 10 per cent discount using this code FKN3253EMSPK, following this link and asset managers can receive a further 50 per cent discount.

Gill Wadsworth, Editor

LATEST NEWS

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Truss Edge writes that the SEC has adopted rules changes that will shorten the standard settlement cycle for US stocks from two days (T+2) to T+1.
New analysis released by WTW has revealed that an investment team with a greater level of diversity leads to better investment outcomes. In the company’s new paper, Diversity in the asset management industry: on the right track but at the wrong pace, data shows that investment teams in the top quartile of gender diversity outperform the bottom quartile by 45bps per annum in terms of net excess returns.

IN MY OPINION

Vault-sized
Kam Patel, CEO of Custodiex, writes the 2023 will be the year of custody.
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