Jensen Partners: Diversity Metrics Report

ACTIONS SPEAK LOUDER THAN WORDS Diversity MetricsTM Report

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CONTENTS 03

03 ACTIONS SPEAK LOUDER THAN WORDS 05 INTRODUCING DIVERSITYMETRICS™ 07 DASHBOARD VISUALIZATION 10 DEI IN ACTION

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ACTIONS SPEAK LOUDER THAN WORDS | August 2021

12 SO WHAT’S THE MESSAGE HERE?

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ACTIONS SPEAK LOUDER THAN WORDS A

s the global alternative asset industry has grown over the years, it has created a wealth of opportunity: Career progression, competitive remuneration, the chance to work with outstanding professionals and build prestigious networks of investors, fund managers and so on.

But take a closer look at the representation of those working in the alternatives universe - and global finance more broadly - and there remains a dominant theme.

Overwhelmingly, this is an industry where white men still hold the majority of senior roles and where gender diversity and ethnic/racial diversity are woefully lacking.

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The most recent US Government Accountability Office (GAO) report revealed that US-registered asset managers oversee more than $70 trillion in assets, yet less than one percent of those assets are managed by minority or women-owned firms. According to a U.S. House of Representatives committee report released in early 2020, across the country’s 48 banks, those holding executive positions are 70 per cent male and 80 per cent white. Goldman Sachs recently disclosed it had only approximately 50 black professionals in senior positions out of 1,500.

The reality is that Black and Hispanic/Latin(x)

professionals have been underrepresented in almost every facet of the financial services industry for decades.

According to the Bureau of Labor Statistics, just 6.9 per cent of the nearly 500,000 personal financial advisors in the U.S. are Black, while 6.3 per cent are Hispanic.

Among financial analysts, the figures are only slightly better at 8.6 per cent Black and 8.3 per cent Hispanic.

Much has been spoken about on Diversity, Equity & Inclusion (DEI) pledges over the last two decades but the industry’s optics have seen little sign of improvement.

Times have changed, however, and with institutional investors and investment consultants placing much 3

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We firmly believe that greater transparency and accountability are needed to make meaningful progress on DEI

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more focus on ESG and diversity issues, alternative fund managers run the risk of becoming outdated if they don’t start to measure and report their DEI metrics in an empirically sound way.

Investor coalitions like the Racial Justice Investing Coalition seek to engage with, amplify, and include Black voices in investor spaces and company engagements, taking direction and guidance from their lived experience.

California Public Employees’ Retirement System (CalPERS), one of the biggest investors in alternative assets, has created a new DEI framework for its intranet and is likely to increase its scrutiny on fund managers over the coming years, to gauge and quantify what DEI advances are being made.

Indeed, a recent report by Mercer suggested that LPs are pushing to incorporate DEI to address imbalances in private markets portfolios.

The white paper, entitled The Power of Change: The what, why and how of creating a diverse private market portfolio, suggests that by doing so could result in outperforming benchmarks. And, as firms are beginning to quickly realise, diverse teams can often lead to better decision-making and reduce the impact of unconscious biases.

Some of the largest PE groups are well on their DEI journey. The Carlyle Group has found that the average earnings growth of portfolio companies with two or more diverse board members has been nearly 12 per cent per year greater than the average of companies that lack diversity.

BlackRock made one of the most progressive pledges in June 2020 by committing to: • Double the representation of Black professionals in leadership positions and increase overall representation by 30 per cent by 2024; • Improve the tracking and measurement of diversity metrics and holding leaders and managers accountable for continued progress, including in quarterly reviews.

Sasha Jensen, CEO and Founder of Jensen Partners

The trends are starting to shift on DEI as the market finally starts to realize what human capital management research has shown for some time – diverse organizations tend to perform better than non-diverse organizations across a wide range of business outcomes.

In fact, in 2020 Jensen Partners counted 45 hires to roles dedicated to diversity, such as Chief Diversity Officer, Head of Diversity Equity and Inclusion and Global Head of Diversity within the alternatives industry.

Many financial organisations, however, are still on the back foot when it comes to addressing DEI. Nevertheless, new technology solutions are now coming to market to help firms empirically measure DEI progress and shine a light on where the gaps are.

Sasha Jensen, CEO and Founder of Jensen Partners

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INTRODUCING DIVERSITYMETRICS™

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ensen Partners has built the industry’s most comprehensive fundraising and investment professionals database within the alternative asset industry. Over the last decade, it has accumulated data on 25,000+ investment and distribution professionals and 8,000+ professionals who self-identify as having a diverse background.

Leveraging this vast reservoir of data, Jensen Partners has built a powerful enterprise software platform, called DiversityMetrics™ to help organizations diversify and measure their distribution and investment teams, and provide a macro perspective on their DEI progress and points of improvement.

The platform harnesses a proprietary algorithm that tracks hires, and promotion and attrition rates, to identify the rising stars and rainmakers within each platform. It is the first platform of its kind to provide real-time insights on the DEI health of the alternatives industry.

“We firmly believe that greater transparency and accountability are needed to make meaningful progress on DEI,” says Sasha Jensen, CEO and Founder of Jensen Partners.

“Both of those goals require data. There is a real irony around how asset managers have embraced data across most every business objective, but not DEI objectives. The power of DiversityMetricsTM is that it enables data-driven decision making. Leadership teams no longer have to blindly invest in DEI initiatives.

They can now systematically plan, measure, evaluate and report their DEI progress and objectively benchmark themselves to their peers.”

DiversityMetrics™ delivers a high-tech, high-touch experience to empower Human Resources Officers ACTIONS SPEAK LOUDER THAN WORDS | August 2021

and Heads of DEI. Jensen Partners combines a rigorous qualitative and quantitative methodology to provide an in-depth appraisal of diversity across an organization, enabling the organization to see how it fares, relative to its industry peers, across key human capital metrics.

As organizations increasingly start to build out dedicated DEI units, the ability to develop a datadriven approach is likely to become a key part of how to attract the right talent, and just as importantly, measure the promotion and retention rate. By doing so, alternative fund managers have the capacity to affect meaningful change over the coming years and make DEI a cornerstone of the industry’s future.

QUANTITATIVE METHODOLOGY

Jensen Partners combines the power of DiversityMetrics™ with proprietary competitor intelligence organogram mapping to illustrate the level of diversity within an organization. Organogram mapping involves the Jensen Partners team market mapping every human in distribution and investment departments, from analysts up to CEO/CIO. “Our team of data investigators is continuously tracking the movement of human capital across the alternatives industry. We have amassed nearly a decade worth of such moves. That much data, when combined with self-reported demographic data, allows for robust empirical analysis – not just of firm-wide diversity, but more importantly, it illuminates which diversity initiatives actually work and which do not,” Jensen says.

Any quant methodology is only as good as the underlying data supporting it. In this instance, Jensen Partners is able to draw upon a proprietary database 5

J E N S E N PA RT N E R S of more than 22,000 alternatives professional globally, alongside relationships with more than 600 alternative investment firms, globally.

A dedicated 25-person team of recruiters and data investigators engages with portfolio managers, capital raisers, investors and distribution professionals on every alternative asset platform to gather first-hand, selfreported diversity and inclusion data. In addition, the team gathers, cleanses and crossreferences data from public sources to verify personal information and track DEI efficacy over time.

The team has tracked more than 20,000 marketing moves across the alternative investment industry since 2014, giving clients the depth and breadth of data necessary to find the best talent as they seek to advance their DEI capabilities.

Jensen Partners’ data shows that once a person of color is hired into the team in a leadership capacity, the team’s diversity rises rapidly over 12 months as that leader leverages their personal network. Seniority of role, combined with diverse leadership, is arguably the most effective way to increase racial diversity at a firm. Moreover, teams with aboveaverage diversity are better equipped to meet the needs of a diverse group of investors.

QUALITATIVE METHODOLOGY

Hiring is one thing but feeling included and part of a meaningful team is quite another. Jensen Partners works extensively to understand what organizations are doing on that front. Through systematic surveying, Jensen Partners gleans insights from the perspectives of individual professionals working on each platform and uses the anonymized findings to contextualize the quantitative data gathered.

Jensen Partners’ industry experience and expertise in DEI objectives enables data-driven recommendations on a firm’s culture, philosophy, management style and compensation. Those factors can then be used to benchmark against competitors, report progress to investors and stakeholders and/ or used to inform a culture or management style that promotes diversity throughout the organization, as well as attract and retain diverse talent.

“Our clients have specific hiring needs. But more broadly, they also want to know how their culture, philosophy, management style and compensation stand up against their competitors. And they want to have a sense of how those attributes fare when viewed through a DEI lens.

“When combining our qualitative and quantitative data with the latest in human capital management research, DiversityMetricsTM gives firms a sense of whether their culture or management style properly promotes diversity throughout the organization, in ways that will help them attract or retain diverse professionals,” Jensen says.

Some of these questions/topics are: FIRM-WIDE DIVERSITY

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ETHNIC DIVERSITY

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MEASURING DIVERSITY HELPS STRENGTHEN THEN THE NARRATIVE

One of the key benefits to using a data-driven platform like DiversityMetrics™ is that it gives organizations the ability to track the progress of their DEI program. Identifying where the gaps are is an effective way to build the right narrative, not only to inform senior leadership of progress but to share the journey with end investors.

To that end, the platform has been designed to help organizations answer questions and address topics pertaining to firm-wide diversity, ethnic diversity, and gender diversity.

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What is the retention rate of your diverse candidates compared to their white male counterparts?

What is your attrition rate for diverse candidates?

What percentage of women and persons of color are in senior positions?

Do you have a dedicated DEI unit or does it sit under HR? What story does your firm tell in terms of diversity?

Breakdown of human capital in terms of monitored groups: Black, Latin(x), Hispanic, East Asian, South Asian, South East Asian, & Middle Eastern professionals • Historical hires and departures of women and men of color on platform • Differential of women and men of color in senior versus junior positions • Promotion rate of monitored groups in comparison with their Caucasian male counterparts

GENDER DIVERSITY

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Breakdown of human capital in terms of gender Breakdown of retention of human capital in terms of gender Historical hires and departures of women and men Intersectional analysis of women of color in junior or leadership positions 6

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DASHBOARD VISUALIZATION

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he quantitative and qualitative methodologies explained above are used to generate a series of intuitive dashboards that allow end users to easily visualize their diversity programs.

At a firm-wide level, DiversityMetrics™ summarizes the ethnic representation of employees, the retention rate of each ethnic/ race group, and the turnover rate of each group over the last 12 months.

1) COVER PAGE DASHBOARD

Cover Page provides a bird’s eye view of a firm.

It summarizes a number of key diversity metrics including a breakdown of gender and ethnic distribution, including monitored groups (Black, Latin(x), Hispanic, East Asian, South Asian, South East Asian and Middle Eastern), breakdown of diversity across senior and junior positions, diversity by geographic locations and enables intersectional comparison.

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Source: Jensen Partners DiversityMetrics™ Capabilities Deck

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J E N S E N PA RT N E R S It is then possible to drill down into an organization to look at DEI from a departmental position.

For instance, a HR Officer might want to look at the level of diversity within the front-office team, such as all capital raisers, deal partners or business development executives.

The dashboard can then be used to present the percentage of women in senior roles and junior roles versus men within an organization’s front-office, as well as the level of retention, attrition and promotion.

These metrics assist Jensen Partners in its ability to assess an organization as a whole and determine how good they are at retaining diverse talent. Do they have a prominent person of color running the investment team who is able to attract diverse talent? And if so, is that talent being retained?

The ability to analyze an organization’s promotion rate gives a clear, quantitative aspect to inclusion. One major way to assess inclusion is, ‘Are people being promoted at the same rate as their peers and colleagues?’

Source: Jensen Partners DiversityMetrics™ Capabilities Deck

PIPELINE MANAGEMENT

Jensen Partners’ data investigation team has been tracking the number of diverse hires, the pipeline of promotions and the number of departures within organizations, since the firm’s inception in 2012. This pipeline data provides an holistic view that can be used to determine a firm’s commitment to DEI based on their pipeline, and how that commitment reflects promotion and retention.

“Managing a pipeline of candidates is key for DEI and it ACTIONS SPEAK LOUDER THAN WORDS | August 2021

is something a lot of organizations are trying to figure out.

Leadership teams need to be asking: What is our pipeline of candidates? What is our progress to ensure we have the right pipeline? How are we tracking diverse talent on the distribution side and the investment side of the business?”

Jensen questions.

The Cover Page dashboard also allows Heads of DEI, or HR Officers, to ask themselves: “What is the average

retention rate for our firm? How does this compare to our peers? Is it above or below average?”

The end user can look at the full organizational chart and then drill down into different teams. For example, maybe the Head of DEI for the senior loans team wants to see how the team is currently structured, and then compare it to senior loan teams in other organizations.

By doing so, DiversityMetrics™ gives them instant, up-to8

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2) INCLUSION DASHBOARD

Jensen Partners has developed a qualitative inclusion dashboard that translates data and shines a spotlight on a firm’s inclusion culture, programs and pipelines. It is a visual extension of the qualitative methodology described earlier, designed to reveal anonymized candidate feedback on diversity programs. The DiversityMetrics™ data investigation team gathers this feedback through surveys of industry professionals conducted on an anonymous basis, to uncover how they feel about inclusion within their organization. Through these efforts, Jensen Partners builds qualitative insights from the ground up. The aim here is to answer questions like: Do people feel they are able to speak up? When they look to the left and the right on the trading floor, do they feel like they belong?

Within this dashboard, end users can quickly determine the retention of men versus women and whether any specific dimensions of diversity need to be considered by the team. For example, past analyses have consistently revealed that distribution teams are more diverse and have a greater representation of women than their investment team counterparts.

Crucially, the DiversityMetrics™ platform reveals not only the retention and promotion rate of diversity employees within one’s own organization, but also how it compares to its peers. This is especially helpful for benchmarking as it might reveal gaps that an organization needs to address to develop its diversity roadmap.

This is empowering alternative asset managers to take a data-driven approach to their DEI programs – in many cases for the very first time.

seniority of women and people of color, rate of retention, promotion rate, and the structure of the DEI team.

This is achieved by using more than a dozen data points.

A company that scores 100 per cent is considered ‘diverse’ and above average for the industry, whereas one that score 207 per cent is considered a ‘diversity pioneer’ and reached a point where it has true equity across the enterprise. Those who score between 50 and 100 per cent are regarded as ‘challengers’, with some considerable ground to make up against industry leaders.

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The data is striking, It’s been talked about anecdotally for years, but now that we have objective data that paints such a stark picture, it is impossible to ignore any longer.

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date visual insights to identify where improvements might be needed, on a go forward basis.

Sasha Jensen, CEO and Founder of Jensen Partners

JENSEN PARTNERS DIVERSITY INDEX

Both the qualitative and quantitative datasets are used to calculate the JP Diversity Index -- Jensen Partners’ objective empirical rating system which assigns a score to asset managers to determine where they are in their DEI journey based on intersectional factors such as rate of ACTIONS SPEAK LOUDER THAN WORDS | August 2021

Source: Jensen Partners DiversityMetrics™ Capabilities Deck

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DEI IN ACTION Latest research by Jensen Partners reveals the very clear challenge facing the alternative asset industry in addressing the imbalance that still prevails with respect to diversity. Focusing specifically on distribution roles (marketing, business development, investor relations, institutional sales, product specialists), the data reveals that between 2019 and 2020, hiring women and Black, Indigenous and People of Color (BIPOC) remained largely unchanged.

Jensen Partners’ data shows that a roughly 2:1 hiring ratio of men to women in distribution roles has changed little in recent years - but even more worrying is the fact that last year showed that gender parity had gone into reverse. Women accounted for three out of every 10 distribution hires in 2020, compared to 38 per cent in 2019.

That hiring ratio falls even further for Black, Indigenous and People of Color who accounted for approximately two out of every 10 hires in 2020; a figure largely unchanged from 2019.

Overall, the hiring of Black distribution and marketing professionals last year (49 moves) remains woefully low but is an incremental improvement on the 29 moves recorded in 2019.

Both sets of data, on gender and ethnic diversity, offer a stark illustration of how far away the alternatives industry is in advancing its DEI agenda.

the 20 largest credit firms, it found some stark results, as one can see in the chart on the right.

Arguably the most revealing statistic is that just 1.2 per cent of Black professionals work in front-office roles. Dig deeper and out of a total of 2,723 professionals, only nine hold senior positions within credit firms, of whom two identify as women.

“The data is striking,” Jensen says. “It’s been talked about anecdotally for years, but now that we have objective data that paints such a stark picture, it is impossible to ignore any longer.”

2) DEI WITHIN AN ASSET CLASS

In February this year, Jensen Partners examined the diversity gap that exists within the credit space. By evaluating data on the total number of distribution and investment professionals within ACTIONS SPEAK LOUDER THAN WORDS | August 2021

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STRATEGY SPOTLIGHT

Front-Office Diversity at the Top 20 Credit Platforms To explore diversity gaps and challenges in the credit space, we evaluated the total number of distribution and investment professionals currently employed at the 20 largest credit firms, as measured by AUM as of February 26, 2021.

BY GENDER

We want to make the industry a better, more inclusive place for everyone.

This has nothing to do with pointing fingers at anyone. It’s about bringing the conversation to fruition in an objective, action-oriented way,

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1) DEI WITHIN DISTRIBUTION ROLES

Sasha Jensen, CEO and Founder of Jensen Partners

BY ETHNICITY

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One in four credit professionals identify as women (704 out of 2,723)

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Eighty percent of credit professionals identify as Caucasian (2,175 out of 2,723)

Underrepresented Groups in Credit:

BLACK PROFESSIONALS

1.2

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HISPANIC/LATINX PROFESSIONALS

1.2 percent of all front-office credit professionals identify as Black (33 out of 2,723)

1.9

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1.9 percent of all frontoffice credit professionals identify as Hispanic/Latinx (52 out of 2,723)

Of the 33 Black professionals in credit, 9 are in senior positions.

Of the 52 Hispanic/Latinx professionals in credit, 19 are in senior positions

Of the 9 Black professionals in senior positions, 2 identify as women

Of the 19 Hispanic/Latinx professionals in senior positions, 8 identify as women

If you are curious about diversity analytics across other alternative asset strategies, contact Jensen Partners to learn more.

JENSEN PARTNERS

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Source: JP Diversity Analytics White Paper- Q2

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SO WHAT’S THE MESSAGE HERE?

As DEI programs evolve over the coming years, organizations have the opportunity to take a data-driven approach to accurately gauge the progress they are making, and demonstrate it to investors.

A firm today might find that they score 78 per cent on the Jensen Partners Diversity Index. However, if a series of important senior hires or promotions are made among Black, Indigenous and People of Color, which then leads to greater diversity of the team through additional hires, it could become a virtuous circle; such that in 12 or 24 months’ time, the firm’s Diversity Index score has risen above 100 per cent.

For all types of alternative asset managers, being able ACTIONS SPEAK LOUDER THAN WORDS | August 2021

to show investors that progress and have a clear narrative on how they are running their DEI programs, could be a powerful proposition.

It will, however, require the right approach.

Jensen Partners’ DiversityMetrics™ data has consistently identified a correlation between HR-led diversity committees and underperformance relative to peers on key DEI metrics. Housing DEI initiatives within human resources sends the signal that DEI is human capital objective, rather than a core business objective.

To truly change the culture, firms must prioritize DEI at the same level they prioritize other key business objectives.

Ultimately, having comprehensive DEI analytics is a way

for organizations to measure progress - not just achieve it.

“We want to make the industry a better, more inclusive place for everyone. This has nothing to do with pointing fingers at anyone. It’s about bringing the conversation to fruition in an objective, action-oriented way,” Jensen concludes.

To achieve meaningful, sustained progress, managers must leverage data to design, implement, maintain and measure DEI initiatives over time and then periodically assess and refine those initiatives, based on the rate of progress they’ve made.

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