Uncomfortable Truths

Editor-in-Chief Kip McDaniel on CIO recognizing problems before market forces can react—without becoming an industry scold.

“I don’t want us to become the industry scold.” That’s what Managing Editor Leanna Orr fired back when I suggested she write a follow-up to the June issue’s “Missing Women of Asset Management.” She had a point: No editor, or magazine, wants to be known as the journalistic equivalent to your mother.

So Leanna and I did what we usually do when we disagree: We poured a glass of scotch, and we argued it out.

Our conclusion was this: No, we do not want to be your mother. We do, however, want to be a very close friend, someone who is brutally honest when we think it warranted. And friends, we have a problem: This industry, both with gender and ethnicity, is lagging.

Thus this issue’s cover story, “Whiteout”, which takes what we discussed in our June issue and extends it beyond gender imbalances. Few discussions are as charged and fraught with peril as the issue of race in America and, indeed, around the world. Yet Leanna tackled this issue with the seriousness and honesty it deserves. It is worth a read, as well as further discussions about how this industry can go from laggard to leader in the area of opportunities for females and people of color.

Which brings me, oddly enough, to transition management. For those who have followed CIO since inception, you’ll know that we’ve had a contentious relationship with this segment of the asset management industry. Starting with our revealing coverage of State Street and ConvergEx in 2011 and extending to this year’s transition management survey and provider league tables, we have been aggressive in our efforts for transparency. I’ve occasionally taken flak for this—a not-disinterested party once labeled me a “muckraker”—but a recent discussion I had with a well-respected industry insider put things in perspective. “The sudden publicity caused massive changes to all firms,” he said as we discussed why the transition management landscape had shifted so violently in the past three years. “It’s all due to the publicity. Transparency only existed for ERISA clients, [and] now it’s industry standard. Tough for firms to admit, but it’s the truth.”

How does this apply to the issue of gender and race ratios within asset management? Because the most common pushback I hear is that “if this was actually a problem, market forces—in terms of asset flows—would have solved it.” That’s not wrong, but it misses a point: The issue must be seen as a problem before market forces can react. Just as it was with transition management—where some managers were able to exploit ignorance and opaque reporting to overcharge clients—we must first recognize gender and race imbalances before market forces can start to solve them.

So we don’t want to be scolds. But just like your best friends, we’ll try our best to be honest with you. Just please do the same for us—over a glass of scotch, preferably.

Kip McDaniel, Editor-in-Chief