Why Investment Decision Methodology Needs a Gender and Racial Lens Now More Than Ever

At VC Include, we’ve built a platform for diverse fund managers to develop relationships with and learn from investors who are interested in finding new market opportunities that align with SDGs and Environmental and Social Governance (ESG). Why? Because all these words can cover up the fact that there is a huge gap, where new investors that don’t look and feel like your “typical investor” remain unreached.

Some of us don’t think much about the color or gender of the people who make most of the investment decisions in the global economy. Diverse asset managers control less than 1 percent of over $70 trillion assets under management in the U.S., widening the gap between minority and women led organizations who receive those investments. The COVID-19 pandemic has highlighted this fact in the U.S. in the way government has deployed assistance to Small and Medium Sized Businesses (SMBs), many are owned by women and people of color. Globally, the story is similar.

As the CEO and Founder of VC Include, I care deeply about creating pathways for diverse fund managers to get a seat at the table. How? By creating programs and access that ensure those managers are what many traditional investors call “institutional grade” fund managers. We support high quality managers so that they, no matter how much capital they manage, think and act like multi-billion-dollar managers. These signals are complicated, because many managers—though educated at the top universities—still don’t get a seat at the table. It’s not just about how much money their fund returns, building trust and getting beyond powerful unconscious bias with the investors that back these fund managers can be challenging.

As we recover and look ahead, we must employ a gender and racial lens to our investment decision methodology.

VC Include was honored to lead a virtual session at the recent Skoll World Forum, focused on the growth of diverse, small to mid-sized private equity, venture capital, and impact fund managers raising capital in alignment with the UN Sustainable Development Goals (SDGs).

Skoll – VC Include Webinar trailer from Bahiyah Robinson on Vimeo.

This gathering provided an opportunity to showcase a few of the diverse managers on VCI’s platform that invest in new market opportunities and underrepresented communities, which have been shown to outperform less risk tolerant investments. During the in-depth 90-minute discussion, asset allocators and asset allocators (LPs) provided context on how and when LPs plan to invest during this time of massive global change.

A few takeaways from the VCI session include:

1. The Need for Long Term Strategic Planning. This is a difficult time for fundraising. VC + Impact and PE emerging fund managers are having to pivot their fundraising efforts; and it’s especially challenging for first time fund managers. While many LPs are open to new meetings, they have pushed new investment timelines to Q4/Q1 2021. Due to the overwhelming uncertainty around COVID-19 recovery, new fund managers that haven’t already established a relationship with LPs have little assurance of additional investment. The best way for first-time fund managers to raise capital right now is to build LPs relationships organically and position the fund so managers can receive investment when the capital begins to flow again.
2. The Need for the Rapid Evolution of Impact Metrics. Allocator (LP) strategies to engage diverse emerging managers are looking to align with ESG, SDGs, and Impact metrics. While some allocators are leaders in the Impact Investment Space, many LPs are not well versed in investing across these verticals, especially in early stage investments. We have IRIS and PRI metrics that most impact investors use as a proxy, but there are still questions about who has “gotten it right,” which creates pause.
3. The Need for Diversity + Inclusion as a Driver of Returns. LPs stressed the need to join platforms like VC Include that support asset managers and allocators to drive best-in-class diverse managers to LPs that are ready to write checks. These organizations provide the infrastructure to support LPs who know that diversity, on average, creates higher returns.

Skoll World Forum gives global innovators a bird’s eye view into the many pressing global challenges we face, made especially acute through the lens of the current global pandemic. We’re grateful to Santhosh Ramdoss and the Skoll Foundation, and our panelists Rilwan Merwan of MassMutual, Heran Getachew Illumen Capital, Adesuwa Rhodes at Aruwa Capital, Jacques-Phillipe Piverger of Oxone X, Brian Luang Aeoah of REFASHIOND, and Alicia Robb of Next Wave Capital for sharing your insights.

We invite you to engage and collaborate with VC Include as we further expand our platform and ESG-driven investor community.