Diversity and private credit

Published: 03 October 2019

The Alternative Credit Council's (ACC) Nick Smith shares his thoughts on the topic of Diversity and Inclusion for private credit, applied at both a collective and individual level 

The Alternative Credit Council (ACC) and the Alternative Investment Management Association (AIMA) have been working with our members on issues relating to Diversity and Inclusion (D&I).  One element of this work is a series of events we will be hosting on various topics that fall under this topic. We were delighted to have Marisa Hall from the Thinking Ahead Institute lead a recent member roundtable on this topic and I’m pleased to share some of the main takeaways from the discussion.

The roundtable began with some basic framing around the concept of D&I, how this applies at a group vs. individual level and how people think about their own identity and that of others at work. This provided a welcome reminder that the surface-level characteristics we all exhibit (gender, age, race etc.) are a fraction of the things people see as relevant when thinking about their own identity. The things people do outside of work, whether it be their home life, how they spend their spare time or the values and beliefs that inform their thinking are often significant contributors to their outlook.

While investors may not be currently making asset allocation decisions solely based on D&I considerations, they are certainly asking more questions. Contributions from the attendees allowed us to explore practical examples of how D&I is affecting the way in which they think about their own businesses. The most interesting part of the discussion (for this participant anyway) covered the steps people had taken to empower employees at all levels of their firms. While leadership buy-in is essential, having D&I perceived as a top-down edict inflicted on others was broadly seen as unhelpful. Providing people in non-leadership roles with more opportunities to contribute to business decisions (described by one participant as ‘making room for voices’) is one way this dynamic could be reversed. Separating responsibility for different facets of D&I, such as assessing how recruitment policy might affect intake, the firm’s approach to staff away days and governance around investment decisions, was also identified as a practical means to obtain buy-in across a firm.

The discussion then moved on to how allocators think about the incorporation of D&I factors into investment decisions. While some research has identified evidence that supports the business case for diversity factors in the investment process most participants agreed it is often hard to separate correlation and causation in this respect. Financial returns remain paramount for investors but the experience of many in the room was that D&I matters are no longer seen as either/or questions. The experience of our participants also suggests that investors increasingly prefer to be agents of change and expect their asset managers to do likewise.   

I’d like to thank all our participants for their frank and open approach towards this roundtable and to our hosts EY for making this event possible. As part of our ongoing efforts to support our members on D&I issues, we will be publishing a practical guide to how alternative investment managers can improve their D&I practices, informed by conversations with some of the industry’s leaders on D&I. We will also be hosting further events around this theme. 

Please contact me using the details below If you’d like to stay up to date with all our work on D&I.

Nicholas Smith, Director, Private Credit - nsmith@aima.org