Opening Remarks at the Meeting of the Asset Management Advisory Committee

Good morning and welcome to today’s meeting of the Asset Management Advisory Committee. Before we get started, let me remind you that I am speaking today only for myself and not for the Commission, the Commissioners, or the staff.[1]

Today, the AMAC is meeting to discuss two topics critical to the evolution of the asset management industry, namely (1) improving diversity and inclusion in the industry, and (2) issues relating to data privacy and the impact of technology on investment advice.

On the first topic, as of last year, per data from a study ordered by the Knight Foundation from which we will hear more shortly, minority and women-owned asset managers advised only 1.3% of global assets under management and those statistics have not changed in a decade.[2] The same study found that ownership by women or minorities does not negatively impact performance so the reason for this lack of diversity cannot be explained by performance expectations. In fact, the study found that women—and diverse-owned firms—were overrepresented in the top quartile investment performance of all of the funds considered.

There is also evidence that diversity of thought and background leads to better creativity and decision making in institutions. A Harvard Business school article found a positive relationship between diversity and an institution’s innovation.[3] The relationship was stronger when more dimensions of diversity were represented.

Finally, America’s population is composed of nearly 40% minority groups.[4] Yet, African Americans and Hispanics have been severely underrepresented among investor households.[5] As panels discussed in previous AMAC meetings, the asset management industry has achieved greater importance to US households seeking to meet their investment needs as well as general financial goals. So, does this underserved clientele provide an opportunity for growth? Doesn’t it make good business sense for the industry to be more representative of the population so that it may better understand current and potential clients?

I look forward to today’s discussion on ways in which the industry can improve the diversity, equity and inclusion within its ranks and with respect to diverse asset managers. I also look forward to any thoughts or recommendations the AMAC may provide on how the SEC can take concrete steps to advance this important dialogue.

The second topic of the day is technology and the use of data. This is a topic that has reshaped asset management as we know it. It is, in fact, a broad and multifaceted topic. On one level, it’s a set of tools. For example, technology has been key to recent business continuity plans as the industry leveraged virtual tools to navigate the COVID-19 market disruptions.

On a more fundamental level, the use of investor data informs investment advice more than ever and technology in general has revolutionized trading and the investor experience. This evolution was discussed during the inaugural AMAC meeting and I look forward to hearing further on this topic from our panelists today. But as the industry becomes more reliant on technology, cyber security and data privacy are an increasing priority. Investors entrust sensitive data to asset managers and I believe that it is important for managers to show that they value this trust and inform clients of how they use client data. On cyber security, the Commission[6] and the staff have long stated, and the staff has recently reiterated,[7] the need for managers to have robust processes in place to keep valuable customer data secure. Conversations about whether and how the industry is addressing cyber security and data privacy are critical.

Before turning it over to Ed, I would like to thank Christian Broadbent, Sirimal Mukerjee, Angela Mokodean, Wale Oriola, DeCarlo McLaren, Emily Rowland, the Division’s Managing Executive Office, the Commission’s Office of Minority, Women and Inclusion, and the Commission’s Office of Information Technology for enabling us to meet virtually today. Their efforts in supporting today’s AMAC meeting are much appreciated.

With that, Ed turning it over to you and I am looking forward to your opening of the discussion.