Princeton University’s Office of Finance and Treasury signaled its commitment to working with minority-owned financial firms this week when it announced that it had entrusted Ramirez Asset Management of New York, part of the oldest Hispanic investment firm in the U.S., with investing 50% of its latest bond proceeds.
After the New Jersey Educational Facilities Authority (EFA) issued $430 million in facilities bonds — the largest transaction in EFA history — to the university in April, university officials say the two intentionally sought a diverse-owned firm to help manage the bond proceeds, calling it a “historic moment.”
But the move is also significant for another reason. It comes amid growing national demand that colleges and universities appoint more diverse asset managers to handle their often hefty endowments. Nationally, the median endowment at private nonprofit four-year colleges and universities sits at roughly $37.1 million.
However, the people managing that money are mostly white men, giving them a disproportionate say over hundreds of millions of dollars each year. In fact, one study commissioned by the Knight Foundation found that women- and minority-owned firms managed only 1.3% of the $69 trillion asset management industry.
That’s due to longstanding explicit and implicit discrimination, said Robert Raben, founder of the Diverse Asset Managers Initiative, which is devoted to increasing diversity within the financial services industry.
“For generations, there was an explicit belief that women and people of color couldn’t manage money,” Raben said. “And now it’s residual. It’s sort of the conventional wisdom among too many chief investment officers [CIOs], too many leaders, that women and people of color can’t do it as well.”
While Raben applauded Princeton’s Office of Finance and Treasury’s latest partnership, he stressed that it stands in stark contrast to the typical actions taken by the Princeton University Investment Company (PRINCO), a separate entity in charge of the university’s endowment.
Or, as clarified at the bottom of a Princeton news release: “[The selection of Ramirez Asset Management] is separate and apart from the University’s endowment investments, which are managed by the Princeton University Investment Company.”
PRINCO oversees Princeton’s staggering $27 billion endowment, one of the largest in the nation. But, according to Raben, the diversity of PRINCO’s appointed asset managers is “terrible.”
“From my observation, [Princeton’s] president seems terrific on diversity,” said Raben. “The leadership team and president care much more about diversity, I think, than the CIO.”
In response to Raben’s comment, Princeton officials provided the following statement: “Mr. Golden [president of PRINCO] has made diversity and inclusion a top priority for PRINCO and a fundamental part of its mission. Under his leadership, PRINCO is committed to improving diversity within its manager roster and more broadly in the investing ecosystem, and it is taking thoughtful, substantive action to achieve those goals.”
But PRINCO isn’t alone in receiving critique from Raben. Nationally, Raben said the state of diverse asset managers in higher education remains somewhere between “terrible” and “miserable.” That’s why Raben’s Diverse Asset Managers Initiative (DAMI) has spent years pushing universities and colleges to release the demographics of their endowment managers, in the hopes that transparency will encourage accountability.
The problem, Raben said, is that CIOs don’t want to talk about data or their investments.
“It’s a whole culture of ‘Leave me alone; I’m just making money,’” said Raben. “They don’t want to talk about Israel boycotts, they don’t want to talk about fossil fuels, they don’t want to talk about apartheid, they don’t want to talk about weapons manufacturers or tobacco. And I don’t think diversity is significantly different from these things.”
It wasn’t until last year, when DAMI partnered with two Congressmen, Emanuel Cleaver, II D-MO., and Congressman Joseph Kennedy, III D-MA., as well as prominent civil rights activist Reverend Al Sharpton, that “a trickle” of universities began releasing some demographic data.
The Congressmen had sent inquiries to 25 of the nation’s wealthiest colleges and universities for detailed information regarding the number of women- and minority-owned asset management firms involved in investing endowments. All but one school, Notre Dame, responded with information, resulting in the Congressmen’s fall 2020 report, “Inquiry into the Use of Diverse Asset Managers by College and University Endowments, and Related Diversity and Inclusion Practices.”
Among other findings, the report found that the percent of assets managed by diverse-owned firms ranged from 5.1% to 35%, depending on the university. According to the report, those numbers aren’t just problematic from an ethical level but from a fiduciary one too. Citing the same Knight study mentioned earlier, the report notes that “diverse-owned firms were overrepresented in the top-performing quartile of mutual funds, hedge funds and private equity.”
Thus, by not appointing diverse-owned firms, universities are “violating fiduciary obligations by failing to generate those returns,” argues the report.
In his response letter to the Congressmen’s inquiry, PRINCO’s president of 25 years, Andrew Golden, said he understood the benefits of fiduciary diversity, writing, “Among many critical reasons for focusing on diversity and inclusion, studies and experience show that diverse teams have an advantage in solving complex problems like those common in investing.”
According to Golden, PRINCO’s endeavors to improve diversity go back almost two decades, with him upping the ante in the past few years. Today, he said about one-third of Princeton’s assets are managed by diverse-firms based in the U.S. — a diverse firm being defined by at least 25% women or minority leadership.
Still, Raben did not find Golden’s 2020 letter sufficient and would like to see a detailed PRINCO report as thorough as the University of California’s recently released report, which Raben called “a crucial, crucial road map” for transparency and data in an interview with Inside Higher Ed. According to him, it is “the most detailed look at the gender, racial and ethnic makeup of a college or university investment team to date.”
But if history gives any sign, it’s unlikely PRINCO will also release a report of that scope. In the past, Golden has told The Daily Princetonian that it “does not intend to create a report like that,” saying that such a report would risk revealing PRINCO’s investment strategy.
In the meantime, Raben hopes the Princeton Office of Finance and Treasury’s latest partnership at least inspires other universities to follow suit.
“It’s a wonderful move, [Princeton] chose to get publicity about it and it means they care,” Raben said. “So I hope it sends a message.”
Similarly, Princeton’s vice president for finance and treasurer, Jim Matteo, hopes the partnership with Ramirez Asset Management will push other institutions to hire diverse-owned financial firms too.
“Our hope is that this action is one that leads to greater consideration of diverse bond proceeds assets managers both within and outside of New Jersey,” wrote Matteo in a statement to Diverse. “… We believe engaging a diverse supplier base is mutually beneficial. It fosters competition, opportunity, and generates value for us and diverse partners by broadening the pool of supplier expertise, perspectives, and capabilities.”
Jessica Ruf can be reached at firstname.lastname@example.org.
Editor’s Note: This story has been updated to include comments from Princeton university officials.