Shannon O'Leary, CIO, Saint Paul and Minnesota Foundation

CIO Insights on Diversity, Equity, and Inclusion

Authors

Nasdaq for Asset Owners

Andres Ramos

Published

Jun 28, 2023 1:48PM EDT

New insights on DEI in fund manager selection for allocators

We recently sat down for an interview with Shannon O’Leary, Chief Investment Officer at The Saint Paul & Minnesota Foundation to learn more about her efforts to use diversity, equity, and inclusion (DEI) principles in her organization’s manager selection process.

Many of the insights Shannon shared about her DEI focused due diligence process can be applied to a due diligence process focused on emerging managers.¹

Be wary of checklist requirements that may disqualify strong candidates

There are practices we’ve seen that are just insurmountable hurdles to an emerging manager, regardless of how diverse that manager is. I know of several pension-based diverse and emerging manager programs where they require a full request for proposal to be completed. The hurdle to doing that with a 2-to-6-person team means it’s just not going to happen. So, you’re not going to see the best emerging managers.

Be pragmatic in your evaluations and understand what’s realistic for smaller managers

In our diversity scorecard and survey, we do a calibration process where we compare our smaller managers, teams that are 15 and smaller, with the big managers, with thirty-person marketing teams. That small team is not going to be doing a pay disparity survey, so it’s unfair to ask that of that organization. We’re aware of what those hurdles are for smaller and emerging manages and we re-weight the survey to put everyone on a more even playing field from a scorecard perspective.

Enhance your access to emerging managers by prioritizing them with your consultant

I think the consultant business model is a problem. It’s so much cheaper to staff, review, and recommend the next Fund XII to Pension ABC, than it is to meet with eight smaller, newer managers. I think in terms of a solution here, as an allocator, we fundamentally drive that discussion. Letting your consultant know that emerging manager investing is a high priority to you, will put pressure on them and shift the mindset.

Interested in learning more about investing in emerging managers?

Read the latest edition of the CIO Quarterly which focuses on the topic.

¹ Shannon’s responses have been lightly edited for clarity and conciseness.