If fund managers want to hold onto Yale’s $31.2 billion endowment, they need to diversify their staff

Green Room
Published in
4 min readNov 5, 2020


Valued at $31.2 billion, Yale’s endowment is a huge win for many investment managers.

However, at the beginning of October 2020, the university’s endowment chief Dave Swensen added a condition to the privilege of managing their money: fund managers have to demonstrate efforts to increase diversity within their firms. He said he wants to see “a level of diversity in investment management firms that reflects the diversity in the world in which we live.”

Since the deaths of Breonna Taylor and George Floyd, companies and institutions have responded to the call for justice in varying degrees. For Swensen, Yale’s endowment is perfect leverage to initiate greater racial equity in the wealth management industry.

A Call to Action

Swensen admits he used to think that the lack of diversity could be attributed to the pipeline: companies don’t hire minority talent because there aren’t any minority applicants. It’s a common excuse for companies (and VCs) when asked why they don’t have any employees (or founders) who aren’t white males.

Swensen, much like the rest of the world, has realized that there are plenty of talented non-white males trying to get in the door. There are just too many gatekeepers and barriers to even reaching the pipeline in the first place.

In his letter to Yale’s fund managers, he calls on them to make the effort to diversify their staff. He highlights the fact that workplace diversity is an advantage, pointing to Yale as proof that being mindful of diversity can have a positive impact.

Numerous studies and reports also support these same insights. A study conducted by the Knight Foundation in 2017 found that women and minority-owned firms only represent 1.1 percent of assets under management (AUM), yet they perform just as well as non-diverse firms. And in 2018, Boston Consulting Group found that companies with diverse teams generated 19 percent more revenue than companies with less diverse teams.

Recommendations for How Fund Managers Can Diversify Their Staff

While Swensen doesn’t set any diversity thresholds for fund managers to meet, he does mention that success will be comprehensively measured in the form of “hiring, training, mentoring and retaining women and minorities” at their firms. And to help guide their efforts, he makes a couple recommendations to achieve these goals.

One example he offered was for managers to recruit from college campuses directly, rather than investment banks. He encourages firms to start with entry level positions, stating that “if we hire and train diverse individuals early in their careers, we can expand the numbers of talented, diverse investment management professionals.”

When fund managers draw their talent from investment banks with a decidedly large majority of white males, it perpetuates the cycle. This, again, plays into the myth that there’s no minority talent, when in fact it’s an issue of networks.

Women and minority groups don’t necessarily have access to the existing network that investment banks and fund managers have built and utilized for decades. So while some may think that the lack of diversity is a pipeline issue, fund managers need to reevaluate how they source talent in the first place.

Gerald Jaynes, an economics and African American studies professor at Yale, attributed the homogeneity of asset management to the fact that “the industry has recruited from the same networks for decades.” And when those networks aren’t diversified, or people don’t recruit in other ways, the pipeline stays the same.

The bottom line

It’s always exciting when major establishments make public demands for justice and equity. And seeing a cornerstone of higher education require a meaningful effort to diversify is certainly encouraging.

The call for diversification may also be a boon for students at Yale and other universities if fund managers take Swensen’s advice to recruit from college campuses directly.

It is, however, all talk for now. Swensen requested that firms complete a survey by October 31 regarding diversity, and that he will ask for annual updates. And perhaps Yale will also provide annual diversity reports, considering that their Investment Office is comprised of mostly white males.

Our take

What we’re most excited to see is the ripple effect of such demands. Swensen wields a huge amount of influence over millions of dollars in legacy wealth. And he’s taking note of how that power can be used in order to help underestimated communities build generational wealth, too.

That’s why firms like ours, Backstage Capital, connect with founders who may not have warm connections in those institutional networks, but still have the tenacity and grit to excel. There is so much untapped potential for growth outside the pipelines that fund managers have relied on for decades.

Backstage Capital documentary, released Oct 30, 2020

As an educational institution that aims to “promote cultural understanding” and “improve the human condition,” Swensen and Yale are certainly taking those principles to heart. Hopefully the move empowers other major institutions to take similar action.

Backstage Capital is a venture capital fund created to invest competitively into startups whose founders are underrepresented in tech & venture, and therefore underestimated. Since 2015, we have raised more than $12M from scratch, and invested in ~150 startups, investing in just 2% of what we see. We now syndicate some of our deals with new and established angel investors (like you), via BackstageCrowd.com. Join more than 2,400 who have joined since June 2020. + NEW! See our brand new documentary at BackstageCapital.com.



Green Room

Venture Capitalist + Tour Manager for Janine & The Mixtape www.ArlanWasHere.com