Kellogg Foundation Offers a How-To on DEI for Finance Employers

Pointing to low levels of diversity among money managers and private equity firms, it gives examples of successful programs that boost diversity.

Increasing diversity in society is a long-held goal of the W.K. Kellogg Foundation. But it thinks one industry needs to up its game in this area: financial services. Kellogg laid out in a new report how exactly to do that.

Kellogg pointed to a low level of representation in asset management by Black, Latinx and Native employees, accounting for just 15% of analysts and 3% of principals. The proportions were similar in private equity, it said, citing a McKinsey & Co. survey. In finance, hiring and promotions of women and minorities were low, and few in these populations felt they belonged. Among Blacks, turnover was almost twice that of whites.

Kellogg spotlighted what it said were good examples of diversity, equity and inclusion among some key financial firms.

For hiring, the Kellogg study recommended the financial employers should create “standardized criteria for interviews and hiring decisions — ensure candidates are assessed according to the criteria, and evaluators provide justification for their assessment across each measure.”

One success story the report pointed to was at Värde Partners, an alternative investment firm specializing in fixed income. To hire its analysts, the firm has a robust diversity recruitment effort that visits colleges, looks at Linkedin and accesses Handshake, an organization that specializes in DEI efforts.

As of fall 2022, Värde had hired seven analysts across two years of college graduating classes and completed recruiting for its third batch of graduates to begin in 2023. In the first year of the three-year-old program, there were more than 90 applicants. This, the Kellogg study said, shows “the appeal of the program.”

For analysts, Värde set up a rotation program, in which new analysts spent six months each in business development and investor relations, finance, investment and operations. Each analyst is paired with a mentor to provide support for career development.

To enhance a feeling of belonging among minority hires, private equity titan KKR created a special council to oversee equity and inclusion. It hosts annual events for Black history, women’s history and Hispanic heritage. To measure how it is doing, KKR tracks year-over-year progress against baseline measure of industry.

BlackRock, the world’s largest asset manager, established its own mentorship network, what it calls a “sponsorship program” for Black and Latinx mid-level staffers that pairs them with senior leaders to give guidance. Sponsors and sponsorees must meet every four to six weeks over a one-year period. “While a direct correlation can’t be drawn, several of the sponsorees have taken on broader roles since completing the program,” according to the Kellogg study.

What about getting more diverse boards of directors? Vista Equity Partners, a PE firm, in 2017 started a big push to bring diverse board members to its portfolio companies. It reaches out to new CEOs, hires recruiters and consults such groups as the Executive Leadership Council, which focuses on Black corporate leaders. Kellogg said that, on those portfolio companies’ boards, 52% of the 70 current members are women, and 30% are individuals from underrepresented backgrounds.

The purpose of the study was to highlight Kellogg’s plan to increase DEI in corporate America. The foundation, the report stated, seeks “to break down the walls, share examples and stories among peers and strengthen this industry’s community of practitioners.”

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