Congressmen author letter calling on Penn to disclose diversity of endowment managers

Rep. Joseph Kennedy III (D-Mass.) and Rep. Emanuel Cleaver (D-Mo.) sent a letter to Penn President Amy Gutmann asking for details on what percentage of Penn’s endowment assets are managed by diverse-owned firms. 

In their letter, which was sent on July 10 to 25 American universities, the Congressmen wrote that the lack of diverse-owned asset management firms — defined as firms with over 50% minority or women ownership — runs counter to the federal government’s interest in promoting equal opportunity. Kennedy III and Cleaver asked Gutmann to respond to seven questions about the management of Penn’s endowment before July 31. 

Penn is currently reviewing the letter, University Spokesperson Stephen MacCarthy wrote in an email to The Daily Pennsylvanian. 

“We are writing to express our concerns with the lack of diversity among asset managers of university endowments,” the Congressmen wrote in the letter. "For years members of Congress have expressed similar concerns, and have been provided with limited, if any resolution and evidence of change.”

Kennedy III said the diversity that universities claim to value in students is not found in their financial partners.

Given the generally strong performance of diverse-owned asset management firms, the Congressmen wrote that the underutilization of these firms is a symptom of systemic racism.

“In 2020, women and minority-owned firms manage a penny for every dollar managed by firms owned by white men,” the letter reads. 

Penn’s nearly $15 billion endowment is managed by an in-house investment team and financial firms the University chooses to partner with. Penn does not publicize information about its partner firms.

The majority of Penn's endowment is invested in the Associated Investments Fund, a pooled investment vehicle in which many individual endowments and trusts hold units. The Office of Investments, which consists of 26 investment, operations, and administrative professionals, manages the AIF.  

Cleaver said the response to their letter has been “anemic,” as the only school that has responded to the letter is the University of California. 

Kennedy III and Cleaver's letter is similar to a letter civil rights leader Rev. Al Sharpton sent to the University in late April. Sharpton, president of the civil rights organization National Action Network, asked Gutmann to release demographic data about the diversity of Penn’s asset managers. In his letter, Sharpton wrote that under-utilizing high performing women and people of color as asset managers diminishes the University’s ability to maximize returns on its endowment.

Gutmann responded to Sharpton’s letter on June 23, writing that Penn and its Office of Investments share his view that diverse investment organizations are better investment organizations. 

Currently, the majority of the Office of Investment’s hiring occurs through its analyst program, which aims to attract recent graduates to the field of investment management, Gutmann wrote in response to Sharpton's letter. Eighty percent of analysts hired since the program's inception have been women or people of color, she wrote. 

Guttman’s letter to Sharpton did not unveil data about firms the Office of Investment works with. 

The letters from Sharpton and the Congressmen have the support of Robert Raben, founder of the Diverse Asset Management Initiative, an organization which seeks to increase the use of diverse asset managers by institutional investors. Raben said he wants Penn to issue a diversity report similar to one issued by the University of California system in December 2019, which detailed the diversity of the University of California’s own investment team and the firms the school system works with. 

"We believe that affirmative steps toward expanding opportunity for diverse-owned firms uphold this nation’s ideals of equal opportunity and will support efforts to close persistent racial and gender wealth gaps," the Congressmen wrote in their letter.