New York State Senator Efrain Gonzalez is determined to increase the use of Hispanic-owned money managers by Gotham's pension funds. He wants New York's public, union and corporate funds to follow the example of public plans in California and Illinois. "Why are (minority managers) good for CalPERS, which is the big one, and not good for us?" Latin Americans make up 27-30% of New York's population.
Gonzalez is planning to convene a meeting between union pension fund officials and elected policy makers in the fourth quarter. The consultant to one of New York's union plans, who declined to be named, said the fund he advises does not use any Hispanic managers, nor has there been a push by trustees to do so. However, he said pressure from politicians could have an impact over the long term.
Progress is further down the line with New York's public funds. Deborah Gallegos, cio of the city's five pension plans, is putting together a formal program to hire emerging and developing managers (see story, page 1). Gonzalez said the public funds have hired some Hispanic managers, but the mandates awarded have so far been on the small side.
Gonzalez said one obstacle is that mainstream consultants, which act as gatekeepers at many funds, are not pushing the diversity issue. He heads up the National Hispanic Policy Institute, which is raising money to enable it to pursue issues such as access to capital. Once this institute has amassed sufficient funds he wants it to meet with investment consultants as an ongoing process. He describes raising awareness about diversity as "a constant maintenance effort."
The way most minority-owned managers get through the door is in emerging manager searches, as many minority-owned managers are small. One consultant said there is evidence to suggest that emerging managers have the potential to outperform in some asset classes because they can move around the markets more nimbly. There is no data, however, to show that minority-owned managers specifically outperform, so it becomes more of a social issue. "It's not our responsibility to impose those views on clients," he said. Wilshire Associates and Watson Wyatt Worldwide said they are able to conduct minority-owned manager searches if clients request them. Jeff Nipp, director of investment manager research at Watson Wyatt in Atlanta, said the firm has conducted considerable research on such managers and it helped sponsor a survey conducted by the Robert Toigo Foundation last year that examined the roadblocks emerging firms face in winning business. He added: "The issue for our clients is not so much who (the managers) are, but what they do--clients want managers who provide relevant products/services."