Cheryl Alston has been CIO of the Dallas Employees’ Retirement Fund (ERF) since 2004, managing approximately $4 billion in assets. During this time, she has not only maintained an impressive 10-year return of 9.4%, but she has also been a trailblazer when it comes to diversifying management and creating opportunities for women and people of color in the asset management world.

Alston, who is also both the first African American and the first woman to be executive director of Dallas’ pension fund, is a strong believer that diversity increases the long-term success of a fund. “The more ideas, the more different approaches to investing, is just better for everyone,” she said.

Shortly after the Great Recession, she pioneered the Next Generation Manager program, which helps Dallas ERF recruit diverse managers. “We saw that a lot of institutional investors were leaning more toward large money center banks, and they weren’t giving opportunities to organizations that had the same performance to compete,” she said.

Often, smaller minority-owned or women-owned asset management firms are unable to afford to attend conferences and networking events that are critical for building connections with institutional investors. And, to make matters more difficult, even when they do manage to attend these meetings, it’s still hard for managers to get ahold of the people they would most benefit from talking to.

“I’ve heard CIOs say that they already have so many meetings in a day just for their day jobs that to do new manager introductions on top of that is kind of tough,” Alston said.

That’s why she created open house events at Dallas ERF that would allow minority and female managers of smaller funds to meet the investment team. These events are hosted at least quarterly and allow diverse managers to network with Dallas ERF staff. “They get that access directly with the investment team,” Alston said. “It’s a way of making sure that we are accessible.”

But Alston’s diversity strategy goes beyond any single individual event or program. “It’s about ‘How do you weave diversity into the DNA of the organization?’” she said. For Alston, that also means also making sure there are a significant amount of women and minorities in every new investment she considers.

“Now, between 10% and 15% of our portfolio is invested in Next Generation Managers, and we’re looking to grow that,” she said. Dallas ERF even applies this philosophy to the brokerage firms it uses. “We make sure that any organization that’s trading for us uses diverse brokerage firms as well,” she added.

Often, according to Alston, the biggest barrier to entry for women and minorities is simply the practice of hiring people via conventional networking methods. In other words: hiring people you already know. Alston said this issue became particularly clear to her when she met with a hedge fund manager who was visiting her a few years ago.

“I looked at his team and he didn’t have any women on his investment team,” Alston said. After he and Alston talked, he realized that the reason for the lack of women had to do with how he went about hiring. He would usually ask people already in the organization for recommendations for new candidates. “The men that were sitting around him would recommend other men. So he realized he had to hire differently,” she said.

A few years later, that conversation paid off. A woman came to Alston at the end of a panel and told her that Alston’s conversation with a manager was one of the reasons she got hired. “She just wanted to say thank you,” Alston said. For her, that story illustrates just how important it is to continue diversifying the industry. And that’s something she’ll keep pushing for.

—Anna Gordon