Having spent my career in money management in several organizations—both public and private—I’ve seen the difference that a strong, innovative culture can provide—not only in terms of generating investment returns, but also for our firm’s employees.   

There has been much written over the years about the benefits of a diverse workforce.  However, despite this trove of research, the financial services industry still lags behind. For example, Morningstar found that in the U.S., only one in 10 funds were led by a female portfolio manager. 

We know diversity leads to creativity, new ideas and fresh perspectives. Despite these well- known benefits, and their supporting statistics, I still get the sense that—for many in our industry—a diverse culture is a “nice to have” and not something that some in the C-suite feel really contributes to the bottom line or can truly benefit clients in a meaningful way.

This needs to change, especially if we want to adapt to evolving client needs and to truly deliver solutions that reflect the benefits of diverse thinking. The investment management industry is one of intense competition. I’m a big baseball fan and I can tell you that any coach will say that an advantage, no matter how small, can have an outsize impact on a team’s success. The impact of a diverse culture can be seen through this same lens.

First, diversity directly impacts investment success. In my industry, investment returns are table-stakes. If your funds or other investment products don’t deliver, you don’t have clients. 

Morningstar first began looking at this issue in the 1990s. At the time, well under 5% of all mutual funds were run by female managers. Globally, just one in five funds have a female manager—a ratio that has not improved since 2008. In the U.S., just one in 10 funds have female managers—which is even worse!  Women are more likely to become doctors, lawyers or accountants than to become investment managers. 

But here’s what’s really interesting: Morningstar also found that having one or more women on a fund’s management team improved the odds that a new fund launch would attract enough assets to be successful.

This thinking is echoed by recent research from Goldman Sachs that shows mutual funds managed by women are outperforming those managed by men last year, as higher relative exposure to technology names tended to drive performance

The same research also found that 43% of women-managed funds—as defined by those with at least one third of portfolio manager positions held by women—have outperformed their benchmark this year, compared with just 41% of those managed by men.

And Morningstar’s findings aren’t an outlier. Chris Redmond, head of manager research at industry consultant Willis Towers Watson, in a recent report by his organization, said that as a result of their research, “pleasingly, the analysis supports our beliefs, investment teams with diversity tend to generate better excess returns.”

Second, more and more clients and prospects are demanding diverse cultures. Often when we meet with clients and prospects, the topic of workplace diversity takes center stage. The fact is, more and more decision makers have to defend their hiring of an investment manager not just in terms of investment results, but also, when all things are equal, why they didn’t hire a more diverse firm. This is especially true when we talk to public pensions or insurance companies.

As more and more companies become concerned with issues associated with environmental, social and governance factors (ESG), the diversity of the staff and management at the investment firms they chose to work with will become more and more important.

Third, today’s investor and workplace is changing. And with that change comes the desire to work with an investment partner who is equally diverse. In fact, as more and more companies begin to change the composition of their board to reflect the changing demographics, this is only going to become more of a factor.

Then there are the next generation of companies, those led by millennials or those that are in newer sectors like renewable energy and technology as an example. According to a 2020 article written by Jessica Barron in Diversity Jobs, millennials will “make up 75% of the workforce by 2025, and their ideas about diversity are far more nuanced than their predecessors’… They’ll also have Generation Z—the most racially diverse generation in American history to back them up. By 2020, 50.2% of children under 18 will come from a minority ethnic group.” The simple fact is, if we fail to address their concerns, we will fail as an industry.

So, how do we fix this problem? 

Earlier this year, I participated in a panel discussion on diversity—hosted by my alma mater, Indiana University, where I was joined by two other senior-level women to discuss this issue. One of the topics that came up was the influence of unconscious bias—things that we might instinctively think about a person, a process or an idea. 

First, it’s important—and this is really hard—to recognize that we all have these biases. I would encourage everyone to think about what biases he or she may have, and then think about how that may be influencing their decisions or their perceptions in hiring and promoting diverse candidates into positions of senior leadership.

Second, being purposeful makes a difference. I’ve seen how putting a specific focus on including diversity of thought and experience at leadership levels can lead to great results. We have a need and a desire to work harder and that starts at the top. We can’t expect this to spread in our organizations if we, as executives, don’t commit to it first

But that’s only part of the equation. As one of the participants in the University panel shared, commitment to hiring and promoting diverse candidates is part of the solution. Once those employees are in the organization, in order to reap the benefits, you need to foster an environment where they feel that they can bring their authentic selves to work. 

Change is hard. Change takes work. Change can be scary. But if our industry is to thrive, everyone from the C-suite, to the fund managers to the support teams needs to adapt. Those that do will create great cultures that enable success for employees, shareholders and clients. Those that don’t, much like the business books I read at Indiana, will end up as case studies.

Christine Hurtsellers is CEO of Voya Investment Management.