The Funders Network is committed to sharing the stories and strategies of our members, partners and others in the philanthropic sector working to create more sustainable, prosperous and equitable communities.
Today, we’re lifting up a recent opinion piece in Fortune authored by Rochelle Witharana, Chief Financial and Investment Officer for The California Wellness Foundation, why the foundation aligned its endowment with its mission by ensuring its assets are managed by firms that are led by significantly diverse teams.
By Rochelle Witharana, CFO at The California Wellness Foundation
The next big investing opportunity isn’t buried in the markets – it’s hiding in plain sight. The data keep stacking up: fund managers from diverse backgrounds are delivering standout returns.
The latest report from the National Association of Investment Companies found that managers who are women or from racially diverse backgrounds outperformed private-equity benchmarks with a 16 percent internal rate of return, compared with 9 percent for the median. This kind of return is catching the eye of CalPERS, the California state pension plan with $500 Billion of assets to manage.
And yet the majority of institutional investors continue to ignore the smart money, instead pouring trillions through the same old-school, closed-door networks.
At the California Wellness Foundation, we’ve seen the strength of diverse managers in our own portfolio. Since 2016, we’ve invested through diverse fund managers who bring fresh insight, disciplined execution, and long-term vision. The results speak for themselves: steady, market-rate performance and broader impact for our mission to advance wellness for California’s communities.
Resetting Risk and Reward
Research from McKinsey, and BCG and Cambridge Associates shows that companies led by women and people of color consistently outperform peers in preparation, strategy, and execution. They invest earlier, identify overlooked opportunities, and back founders serving fast-growing, underserved markets.
With all the performance data you would think that gender and racially diverse managers would be attracting an enormous volume of portfolios to invest. But that’s not happening.
A Knight Foundation survey shows out of $82 trillion of assets under management in the US, just 1.4% were invested with diverse managers in 2021. So where is everyone?
Traditional investing often favors familiarity: established firms, “old boy” networks, and stagnant playbooks. Such narrowness can stifle innovation and overlook emerging value.
Diversifying managers outside of old school networks brings a dimension beyond the expected – that prized edge that delivers higher financial returns. When investors draw from wider experience and networks, they see risk and potential more clearly. They also capitalize on stable, undervalued markets that hold untapped growth potential.
➡️Head to Fortune to read Rochelle’s full commentary piece, Fund managers from diverse backgrounds are delivering standout returns and the smart money is slowly starting to pay attention