What are the Diversity and Inclusion (D&I) investing possibilities in alternatives?

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Why Diversity And Inclusion (D&I) Is Necessary For Alternative Investment Firms

In the last few years, alternative Investment funds have made a noticeable difference in improving diversity and inclusion (D&I), but the progress remains too slow for many onlookers.

Understanding The Importance Of D&I In Alternative Investing

D&I should not be seen as a target for firms to hit every year. Instead, it should be recognized as a way to increase a firm’s growth and performance through diversity of thought and background. In an industry that thrives on providing innovative alternatives to investors through its contrarian approach, there should be a focus on increasing the wide-ranging potential that diverse talent provides.

D&I is not an initiative that firms must undertake but a way for them to achieve a true competitive edge from the rest of the industry. Ultimately, this must be done through a fair hiring process and a firm’s understanding of the importance that new and different viewpoints can provide.

Recent research has further highlighted the importance of D&I:

  • One study found that there was a “statistically significant relationship between diversity and innovation outcomes in all countries examined” and that more diverse firms “had both 19 percentage points higher innovation revenues and nine percentage points higher EBIT margins, on average.”
  • McKinsey’s Diversity Matters Report found that “for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.”
  • Harvard Business Review found that a company’s innovation revenue would likely increase 1% from improving the diversity of their management team.
  • The McKinsey report also found that companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their national industry median.

When taking the research into consideration, it becomes clear that embracing D&I is about embracing success and innovation in the competitive alternative investments industry.

Finding Areas Where D&I Potential Exists For Alternative Investment Management:

There are still plenty of areas where D&I potential exists for investment firms. Investors are no longer just looking for recognition that a firm has reached its D&I goals but has embraced the role that it can play for their company. To do this, firms should create transparent policies that demonstrate their actions, outcomes, and targets to investors, employees, and prospects.

There are many ways that a firm, fund, or company can start down the journey of becoming increasingly diverse and inclusive.

If you are unsure of where to start, there are many actionable and easily answered questions that you can ask.

  • Are there elements in your recruitment process that are systematic barriers for individuals of certain backgrounds?
  • Are you actively measuring KPIs for D&I? Are they quantifiable?
  • Do you have internship opportunities that target women and minorities?
  • Are there roles at your firm that are difficult for women or minorities?
  • What is your maternity policy?
  • Are there systems in place to attract, develop, and retain diverse talent?

These are just a few of the questions that firms must ask themselves to reap the benefits of D&I fully. There are also plenty of industry initiatives and organizations that offer advice and guidelines to follow.

Some of these include:

Socially Responsible Investing Is The Future: It’s Time To Invest In Diversity And Inclusion.

It is clear that diversity matters. As the world becomes increasingly more connected and diverse, firms embracing D&I are seeing increased performance financially and individually. That said, many organizations have more work to do to ensure that minorities and women are achieving all they can in their respective roles. There are still plenty of opportunities for firms to mentor, develop, and attract diverse talent. With the gap widening between companies that have embraced D&I and those that have not, the time to invest in your future is now!