Today, four leading Democratic members of Congress hosted Chief Investment Officers (CIOs) from some of the largest federal pension plans and senior executives from the nation’s leading minority and women-owned asset management firms for a half-day summit to discuss the underutilization of these firms in the management of federal retirement plan assets.
Congresswoman Maxine Waters (D-CA), Ranking Member of the Financial Services Committee, U.S. Senators Cory Booker (D-NJ), Elizabeth Warren (D-MA) and senior Committee member Congressman Gregory Meeks (D-NY), presented the event, which focused on best practices from state, local and private sector retirement plans for identifying and engaging minority and women-owned asset management firms, as well as concrete steps that can be taken to ensure minority and women-owned asset firms are able to meaningfully participate in the management of federal retirement assets.
Lauding progress made during the discussion, the lawmakers announced the formation of a working group to develop strategies for addressing the structural barriers that have prevented meaningful inclusion. They also committed to more robust Congressional oversight of federal retirement plans and endowments moving forward.
The event brought together a number of key stakeholders, including lawmakers, members of the Obama Administration, CIOs of various federal retirement plans, senior investment professionals and trade associations. The summit marks the first time members of Congress have hosted an in-depth discussion on the issue.
The hosts for today’s event have long-advocated for federal pension plans to increase the diversity among the firms, which manage the assets of federal employees and retirees. As a result of their efforts, the Pension Benefit Guarantee Corporation recently announced a Small Asset Managers Pilot Program to address the barriers to competition that some asset management firms still face even when they outperform larger asset managers. States including California, Connecticut, Illinois, Indiana, Maryland, Michigan, New York, Ohio, Pennsylvania, and Texas have set up emerging manager programs to ensure that diverse and emerging managers are not left out of managing pension funds.
“Part of closing the wealth gap requires that minority and women-owned business are afforded equal federal contracting opportunities to grow their businesses and create jobs. We in Congress have a role to play in connecting these communities and businesses, and today’s summit was an excellent step in that direction,” said Ranking Member Waters. “I am grateful for the wide array of stakeholders who made today’s summit a very productive one. We will continue this critical dialogue with the formation of a Congressional working group charged with addressing the long-standing barriers to inclusion that for far too long have kept high-performing minority and women-owned asset management firms out of federal retirement plans and endowments.”
Congressman Meeks added, “In order to reverse decades-old policies that perpetuate the status quo with harmful institutional barriers to women and minority asset managers, all stakeholders must be engaged. Greater inclusion in the financial services sector is in the best interest of investors, and it is absolutely consistent with fiduciary standards to seek the highest returns on investments. Deeply imbedded inequalities and policies that exclude diverse asset managers have been limiting for too long. Only by directly confronting these stubborn policies, starting with federal agencies, can we end long standing disparities.”
“During my first year in the Senate, I urged the Commerce, Labor, and Treasury departments to address the underrepresentation of minorities and women among asset managers used by the federal government. It’s important to continue the discussion to find ways we can expand access and opportunity for women and minority-owned asset management firms,” Sen. Booker said. “These asset managers are experienced professionals who often outperform larger firms, and we can’t afford to ignore their talents. The federal government should have professionals managing their pension plans who reflect the diverse makeup of the hardworking employees who faithfully contribute their hard-earned money into the federal retirement system.”
“Studies show that minority and female owned private equity firms and hedge funds consistently outperform their peers. It’s time for federal agency retirement plans to get with the program and begin recruiting a generation of asset managers that looks more like the workers in their agencies,” Sen. Warren commented.
State, local and private retirement plans have long led the way in allocating retirement assets to minority and women-owned firms. Unfortunately, these firms have struggled to convert their success with state, local and private retirement plans into meaningful participation in the management of federal retirement assets. The briefing held today builds on previous discussions with the Obama Administration and federal retirement plans to address the barriers that have prevented meaningful participation, and to develop potential strategies for increasing diversity and inclusion in federal asset management. The event provided a unique opportunity for federal agency CIOs to have discussions with and learn from their public and private sector counterparts about their experiences working with emerging and diverse asset managers. Specifically, CIOs from the Federal Retirement Thrift Investment Board, the Army and Air Force Exchange, and the Federal Reserve Employee Benefits System were in attendance, among others.
Approximately 34 percent of the federal workforce currently self-identifies as minority. Demographic trends indicate that proportion is likely to grow. Currently, federal workers do not have the ability to invest their retirements with service providers with proven track records of performance and that reflect the growing diversity of the federal workforce.