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asset management

4 mins read

Diverse Private Equity Firms Outshine Benchmarks, Raising Questions About Underinvestment

A recent report by the National Association of Investment Companies (NAIC) has reignited the conversation surrounding diverse-owned private equity firms and their consistent outperformance of industry benchmarks.

Titled “Examining the Returns 2023: Further Evidence of Diverse-Owned Private Equity Firm Outperformance,” the report paints a compelling picture of the expertise and potential within this often-overlooked segment of the investment world.

The report arrives against a backdrop of evolving demographics in the United States. While recent news cycles may paint a picture of heightened public discourse around diversity, the actual landscape is far more nuanced. Based on the 2020 Census, the U.S. population is diversifying rapidly, particularly among younger generations.

The Brookings Institute, analyzing early Census data, found that while 40% of the total population is now considered diverse (up from 30% two decades ago), this figure rises to near parity among those under 16. Similarly, the Census Bureau’s Diversity Index, indicating the probability of two random individuals belonging to different racial or ethnic groups, jumped to 61.1% in 2020, a significant increase from 2010.

This demographic shift underscores the increasing relevance of diverse perspectives in various sectors, including private equity. The NAIC report highlights the superior performance of diverse-owned PE firms:

Superior Returns

From 1998 to September 2022, diverse PE funds (represented by the NAIC Private Equity Index) generated a net Internal Rate of Return (IRR) of 17.23%, a net Total Value to Paid-In (TVPI) of 1.68x, and a Distribution to Paid-In Capital (DPI) of 0.66x. These figures significantly surpass the industry benchmarks established by The BURGISS Group.

Outperforming the Median

The NAIC Private Equity Index consistently outperformed the median BURGISS fund across various metrics. For instance, when comparing IRR by vintage year, diverse PE funds outperformed the BURGISS Median Quartile in 66% of the years studied.

Top Quartile Performance

Notably, the NAIC Private Equity Index performed in the top two quartiles (first or second) 72.2% of the time, with 31% of the funds even achieving top quartile net IRRs during the entire period.

These findings challenge the long-held notion that investing in diverse-owned firms comes at the cost of sacrificing returns. In fact, the data suggests the opposite. By allocating capital to diverse PE firms, institutional investors have the potential to not only enhance their returns but also fulfill their fiduciary duty by considering a wider range of investment opportunities.

Despite the clear evidence, the report also highlights a concerning reality: diverse managers manage less than 2% of the industry’s total assets. This underinvestment persists despite the consistent track record of superior performance documented in the NAIC report and previous studies.

As the financial services industry evolves, the call for inclusivity extends beyond moral considerations. The evidence presented in the NAIC report suggests that embracing diversity is not just the right thing to do, but also a strategic and financially sound decision.

By recognizing the talent and potential within diverse-owned firms, investors can unlock significant value for themselves and contribute to a more equitable and prosperous investment landscape.

by Tony O. Lawson

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11 mins read

The Triple A Act: Diverse Fund Managers’ Opportunity to Add Trillions to GDP

The American Asset Allocator (Triple A) Act is an innovative piece of legislation aimed at transforming the financial sector by addressing the absence of diversity among key decision-makers in American capital allocation.

Byron Wilson, the visionary behind this groundbreaking act, has put forward this transformative proposal to ensure that capital opportunities reflect the diverse fabric of the nation.

In this interview, he discusses the driving forces and goals behind the Triple A Act, the strategies for promoting equitable distribution of assets, and the potentially far-reaching effects on cultivating diversity and inclusion in the financial industry and beyond.

triple a act
Byron Wilson


What motivated you to propose the American Asset Allocator Act?

There are $82 trillion in assets under management across private equity, venture capital, and so forth. Women and people of color gatekeep 1.4% of said capital. The American Asset Allocator Act, “The Triple A Act”, will make sure that the gatekeepers to American capital will look like all Americans. 

Whenever I went to interviews within the financial services sector, I seldom saw mirrors on myself who were gatekeepers. The gatekeepers were overwhelmingly white men. I then concluded that there is a supply and demand imbalance. After all, minority enrolment at US universities is 43.4%. Women earn more degrees than men. The supply side of talent comes from universities, but this is not reflected in the workplace as one moves up the economic pyramid. I then began to ask, why? Is this by design? The answer is yes. 

As time went on, I began to realize that many problems manifest themselves as healthcare problems, education problems or prison industrial complex problems, etc. But these are just symptoms of problems. They are not the root causes of problems. By way of example, Professor James Foreman at Yale pointed out that not too long ago a mill that employed many people just outside Atlanta was closed and the jobs were shipped overseas.

Within a few weeks, an extension to the local prison was built. The root cause of people being incarcerated is access to capital. Capital outflows and crime inflows. The biggest predictor as to what a child will score on the SAT is what his parents earn. Again, this goes to access to capital. Many policymakers and so forth are quick to focus on the symptoms of problems. In so doing, this has not solved many problems. The Triple A Act deals with the root causes of problems. This is what motivated me to propose the Triple A Act.

What are the key objectives that you hope to achieve through this legislation?

The Triple A Act aims to increase the representation of people of color and women in listed companies, privately owned companies, and small medium enterprises, aligning their ownership with the demographics of the United States. By diversifying the gatekeepers to capital, the act intends to ensure that those who control access to financial resources reflect the country’s population. Additionally, the Triple A Act seeks to generate 20 million jobs and contribute over $5 trillion to the GDP.

These figures may appear optimistic, but it’s important to note that according to Citigroup, racism has cost the U.S. economy $16 trillion over the past two decades.

Furthermore, the act addresses valuation bias, as highlighted by a Case Western study, which demonstrates that company valuations, all else being equal, vary based on race and gender. This bias can have significant implications, with higher-valued companies having greater resources to hire employees and offer competitive wages. Moreover, the owners of these higher-valued companies are more likely to have a higher net worth.

Lastly, the Triple A Act aims to increase the circulation of the black dollar from its current level of one round to approximately 20 rounds.

What measures are in place to monitor and evaluate the impact of the Triple A Act on the allocation of assets to minority and majority asset management firms?

Some of the impacts of the Triple A Act would be the significant increase in minority-owned listed companies. This would mean that company ownership of the S&P500 and so forth will mirror, to a large degree, the diversity in the US. Also, this legislation is expected to add $5 trillion to GDP. It is also expected to create 20 million jobs and so forth.

One way to evaluate the impact is to have a before and after picture of the Triple A Act and hold constant other intervening variables that may impact job creation, company listing, etc to pinpoint the impact of the Triple A Act over time. Over time, we could see the amount of added GDP due to the Triple A Act.

Looking ahead, what do you hope to achieve through this legislation in terms of promoting diversity and inclusion within the financial industry, and what steps do you believe will be necessary to sustain progress in this area?

The primary effects are job creation, diversity of listed companies, diversity of privately held large-sized companies, diversity of mid-sized companies, and small medium enterprises.

The secondary impacts may include the shrinking of the prison industrial complex. As I mentioned earlier, there is a correlation between excess to capital and crime. The Triple A Act may also impact test scores, healthcare outcomes, etc because when we sort out excess to capital, these other socio-economic indicators will move in a positive direction. 

The Triple A Act will diversify the gatekeepers to capital. When we diversify the gatekeepers to capital, we will diversify the recipients of capital. 

Another one of the concomitant consequences is that it will promote diversity not just within financial services, but within other industries too. Just imagine that a Black woman founded Airbnb which at one point was worth circa $ 100 billion. Airbnb will require a lot of service providers especially when it acquires other businesses.

It will require law firms to provide legal due diligence for said transaction; it will require an investment bank to execute the transaction; it will require an accounting firm such as PwC to provide accounting due diligence and it may require a consulting firm such as McKinsey to provide strategic due diligence. This female CEO of Airbnb can turn to all her service providers and demand that they have more diversity at the associate, VP, and partner levels. These firms will respond because fees charged to Airbnb feed into these service providers’ revenues. 

One of the reasons that I chose the legislative route is because laws stay laws regards of sentiment. When George Floyd was killed many people were upset, but the racial wealth gap has widened since his death. Many of the corporate promises that were made have not been fulfilled with regard to access to capital. Our rights as citizens should not be contingent on the whims of other citizens because this puts one set of citizens at the mercy of another set of citizens. The law is what we need to focus on because the law could stay in place for decades if not centuries. Attitudes tend to change in much shorter time span. 

We need to be desperately organized to take advantage of these opportunities when they come. We have to be alive to the notion that there are many who would work to steadfastly undermine the Triple A Act once it is passed. They will point to corruption at a minority asset management firm to suggest that this is why “these people” should not have access to capital. So, we need to remain vigilant. 

Martin Luther King once said that the “economic problem is probably the most serious problem confronting the negro community.” Thus, the Triple A Act will redress economic problems within the black community as well as other communities. Economic power supplants political power. There are many people who seem not to understand what Martin Luther King was talking about when he talked about power.

So, I will end with his quote on power. “Power without love is reckless and abusive, and love without power is sentimental and anemic. Power at its best is love implementing the demands of justice, and justice at its best is power correcting everything that stands against love.”

by Tony O. Lawson

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3 mins read

Largest Black Owned Mutual Fund Secures $200 Million Investment To Scale Minority Owned Businesses

Ariel Investments, the largest Black owned mutual fund, is launching a private investment firm, Ariel Alternatives, which will initially focus on funding and scaling minority-owned businesses. The move into private investments is a first in the company’s 38 year history.

Ariel Investments co-CEO Mellody Hobson along with Leslie Brun are the co-founders of Ariel Alternatives. Mr. Brun, an Ariel board member and founder of the investment firm, Hamilton Lane, will be its chairman and CEO and will lead the first initiative of Ariel Alternatives called “Project Black.”

The new fund, which has secured $200 million in initial funding from JPMorgan Chase, plans to invest in minority owned businesses and non minority owned businesses that will serve as leading suppliers to Fortune 500 companies.

The firm plans to infuse the non minority owned businesses with the capital and minority executive talent needed to qualify as a certified minority business. In order to qualify as a certified minority business, suppliers must be at least 51% minority owned, managed, and controlled, according to standards established by the National Minority Supplier Development Council.

According to Brun, Project Black aims to fill a massive diversity gap in the corporate America supply chain. Fortune 500 companies spend about 2% annually on minority-owned suppliers, well short of the 10% to 15% spending goals many corporations set last year.

Despite “announcements and pronouncements” by corporations about increasing the amount they spend with minority-owned suppliers, many have difficulty finding those with enough capacity to meet their needs, Brun said.

“We’re intending to create those minority suppliers of scale, in concert with our Fortune 500 relationships, to provide the solution to their issue, as well as create the opportunity for us to then leverage that into the social impact initiatives that we have,” he aded.

According to a release announcing the fund, “Project Black will forge a new class of Black and Latinx entrepreneurs. The initiative will seek to position these companies as leading suppliers to Fortune 500 companies — supporting supply chain diversity.”

Project Black plans to focus predominately on health care, industrial, media and marketing, outsourcing, manufacturing and packaging, technology, transportation and logistics, and financial and professional services.


Tony O. Lawson

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