Emerging Manager Monthly: NEPC Enhances DEI Rating System As Diverse Manager Usage Grows
NEPC’s Nedelina Petkova was featured in the June issue of Emerging Manager Monthly which focuses on our new Diversity, Equity, and Inclusion rating system for investment managers. View the article on Emerging Manager Monthly’s site here.
Investment consultant NEPC has incorporated a new Diversity, Equity, and Inclusion rating system for investment managers as part of its efforts to move the needle.
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“We think [this is] another way for us to push the industry forward and really fundamentally believe that diversity of the investment teams allows for better decision-making and outcomes… that’s exactly what we think our role is as consultants and as investors,” said Nina Petkova.
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“This isn’t just an exercise in us looking at the demographic of the employee base and assigning a score. We are doing a deep dive on evaluating DEI efforts at our managers, both on a firm level and also on a strategy level. We’re focusing on diversity stats, both only across the entire employee base through EEO1s, but also on the leadership team and the investment teams. We’re also measuring the firms’ progress in evaluating if they have the right mechanisms to measure their own progress. We’re assessing the resources that they have at the firm dedicated to diversity efforts. And lastly, we’re looking at their engagement, both inside the organization and outside of the walls of the firm, including their diverse supplier policies and brokerage relationships. And so, like I said, I believe this will fundamentally change the way in which clients utilize DE&I to ultimately make more informed decisions,” she said.
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FIN News: NEPC Enhances DEI Rating System as Diverse Manager Usage Grows
NEPC was featured in a recent FIN News article which covered the launch of our new DEI Rating System which was announced in our 2022 DEI Progress – Part 1. View the article on FIN News’ site here.
401k Specialist Magazine: NEPC Finds Over Half of Clients Use Diverse Managers
NEPC was recently featured in a 401k Specialist Magazine article that dug into our 2022 DEI Progress – Part 1 which found that more clients are implementing DEI strategies and working with diverse managers. View the article on 401k Specialist Magazine’s site here.
Client exposure to diverse strategies is climbing, finds a new report by investment consultant and outsourced chief investment officer (OCIO) provider NEPC.
Its latest report, the NEPC found that 59% of its clients use diverse managers, with diverse firms currently investing $40.4 billion in client assets and managing 182 client strategies. Currently, NEPC serves over 400 retailer clients and $1.4 trillion in total assets.
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Pensions & Investments: NEPC to offer DEI Ratings System for Money Managers
NEPC was featured in a recent Pensions & Investments article delving into our 2022 DEI Progress – Part 1 and highlighted our new DEI Rating System. View the article on Pensions & Investments’ site here.
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Mr. Forde said NEPC’s new ratings system could contribute to further progress on that score. “One of the benefits of the DEI ratings, moving forward … is that it puts the power of information back into the hands of clients,” he said.
“We have a myriad of different clients, we have a myriad of different opinions on how to incorporate DEI and other things into their investment process. DEI ratings give them the opportunity to look at their entire portfolio of managers, for us to provide our insights directly to … empower them to say, ‘this is important to us in this way’ and craft it how they see fit, or how they don’t, and so I think the DEI ratings … is really additive in this type of environment,” he said.
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NEPC 2022 DEI Progress Report: Raising the Bar for the Investment Industry
BOSTON–(BUSINESS WIRE)– NEPC, a leading research-driven investment consultant and OCIO provider with $1.4 trillion in assets under advisement, today published its third annual Diversity, Equity, and Inclusion (DEI) Progress Report, a report that aims to uncover the investment-oriented benefits of diversity, supporting NEPC’s goal of being the investment industry’s most intentional and data-driven DEI leader.
This year’s report highlights the firm’s steady progress toward NEPC’s Diverse Manager Policy goals, which were initially set in 2019. This latest report is a direct reflection of NEPC’s view that diversity, equity, and inclusion drive sustainable success for clients, employees, and communities. Diversity helps unlock a wider range of talent and ideas, ultimately ensuring that investment teams are able to meet and achieve their investment goals.
“From the outset, our goal has been to help lead change in the investment industry by emphasizing the value of transparency and metric-driven policy when it comes to DEI. To do that, we’ve remained committed to learning, growing, and thinking about diversity as an identifier of opportunity and risk, not only within our walls but externally as well, and as a differentiator to better serve our clients, ” said Will Forde, Partner, Co-Chair, Diverse Manager Committee. “With well over half of our clients using Diverse Managers, we recognize the progress that we’ve made when thinking about engagement with diverse-owned and -led firms, but recognize the work that needs to be done in order to maintain and improve upon those efforts.”
NEPC’s 2022 DEI Progress Report provides insight into the firm’s DEI initiatives from a marketplace perspective. Listed below are highlights from this year’s report:
Client Exposure to Diverse Strategies
- 59% of NEPC clients use Diverse Manager(s)
- $40.4B of client’s assets with Diverse Firms
- 182 client strategies managed by Diverse Firms
Increasing Diversity in NEPC’s Recommended Strategies
- Driven by the Explorer Program, a platform to identify and engage with diverse-owned and -led investment management firms that are not currently 1- or 2-rated by NEPC, the centerpiece of NEPC’s DEI program is the goal of achieving 15% Diverse Manager representation by 2024.
- NEPC achieved its initial goal of 10% Diverse Manager exposure by 2022 for OCIO accounts and is on track to achieve 15% Diverse Manager exposure by 2024.
- NEPC conducted 206 interactions with Diverse Management firms in 2022, more than 3X the interactions in 2019.
“As the conversation around increasing diversity in the investment space continues to evolve, so must our goals and how we’re thinking about DEI standards, said Mike Manning, Managing Partner. “We are proud of what we’ve accomplished thus far, but NEPC is aware of the work that remains, and is committed to identifying meaningful ways to continue engaging with diverse-owned and -led firms.”
For more information about NEPC’s sustainable solutions like its Impact Investing Committee and Diverse Manager Committee, click here. To download the full results of NEPC’s 2022 DEI Progress Report, click here.
ABOUT NEPC, LLC
NEPC is an independent investment consultant, private wealth advisor, and OCIO provider serving over 400 retainer clients and $1.4 trillion in total assets. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
Contact:
Laura Nascimento
[email protected]
Institutional Investor: Endowments and Foundations Increasingly Want Their Top Advisors to Act Like OCIOs
NEPC’s Sam Austin and Steve Charlton were featured in a recent Institutional Investor regarding the findings of NEPC’s 2022 Governance Survey. View the article on Institutional Investor’s site here.
Institutional investors increasingly want their most trusted advisors to function like outsourced chief investment officers.
In the next five to seven years, a third of endowments and foundations want their most trusted advisors — usually investment managers — to handle their portfolios like OCIOs, according to NEPC’s 2022 governance survey published Thursday. The survey included responses from organizations including public and corporate pensions, foundations, defined contributions plans, healthcare organizations, and endowments.
This increasing reliance on managers and consultants was recorded across fund types, with 19 percent of healthcare funds and 17 percent of defined contribution funds also anticipating that their most trusted advisors will act like OCIOs in the near future, up from 10 percent and 13 percent, respectively.
Among endowments and foundations, 26 percent said they currently view their most trusted advisors as investment managers, which NEPC defined as a “consultant or manager who handles everything like an OCIO.” Thirty-two percent said they see their most trusted advisors taking on this role in the next five to seven years.
“That’s a trend that’s been going on for a while now,” Steve Charlton, NEPC partner and head of client solutions, told Institutional Investor. “At least in the last six or seven years, endowments and foundations have been turning more and more to OCIO-type organizations to manage their assets.”
As institutions attempt to navigate increasingly-complex markets and develop more advanced portfolios with exposure to alternative investments like hedge funds, private equity, and private debt, they may need additional expertise from OCIO providers who have more experience in these areas, Charlton said.
Among the asset owners surveyed by NEPC, 43 percent described their most trusted advisor was a partner, someone with whom they work closely to develop their investment programs. About a quarter said they have advisors (“I make the decisions, but almost always do what they recommend”), while 15 percent said they use a consultant as a key source for information and perspective. Twelve percent identified their most trusted advisor as an investment manager who acts like an OCIO, with 17 percent expecting their top advisors to take on this role in the next five to seven years.
“This survey is reinforcing our belief that more and more investment committees or brand sponsors or whoever it might be are interested in turning over additional responsibilities to their trusted advisor,” Charlton said.
NEPC also asked respondents about the degree to which they consider diversity, equity, and inclusion issues — something which 80 percent agreed was an important consideration in their investment programs.
However, respondents from pension plans (both corporate and public), defined contribution plans, and insurance organizations were slightly less likely to indicate DEI as an important aspect of their program. Specifically, 38 percent of respondents from these organization types said that DEI was not important, significantly higher than the average of 20 percent.
Meanwhile, endowments and foundations were slightly more inclined to say that DEI initiatives were “extremely important” to their organizations. Nineteen percent of respondents from endowments and foundations answered “extremely important” versus 18 percent overall.
This discrepancy may be a result of endowments’ and foundations’ more recent adoption of DEI issues compared to pension plans, according to Sam Austin, NEPC partner and governance board member. Austin said pensions were at the forefront of DEI initiatives in the eighties and nineties. Other institution types have started to catch on in more recent years, particularly after the murder of George Floyd in 2020 and subsequent civil rights protests.
“Endowments, foundations, and healthcare organizations have increasingly caught fire over this issue over the last two and a half years, going back to that catalyzing event of George Floyd,” Austin said.
Austin said endowments and foundations now place a greater emphasis on aligning their organizations’ missions with their investment portfolios than they did ten or 15 years ago.
“The intensity of the issue is more front and center and it’s a fresh topic for the endowment and foundation world, whereas it’s been an issue that’s been on the table for pensions for much longer,” Austin said.
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