The Investment Case for Diverse-Owned Managers
When it comes to aligning your investments with your values, Marcia Page holds a place in my personal Hall of Fame.
I met Marcia through serving together on the Board and Investment Committee of The Minneapolis Foundation. Marcia co-founded and now serves as Executive Chair of Värde Partners, an institutionally focused, $14 billion global alternatives investment firm. But for the past four years, she has been working to create and launch MPowered Capital, which targets private minority investments in asset managers with diverse ownership. Marcia has already invested $25 million of her personal capital in MPowered's first fund and will ultimately commit $75 million alongside limited partners (LPs). Baird is also an investor in MPowered.
I recently had the opportunity to talk to Marcia about the landscape for women and diverse professionals generally in asset management and across the financial services industry.
Here are excerpts from our conversation:
What was your motivation in creating, and in providing such significant personal financial support, for MPowered Capital?
Page: I have had the most amazing 30+ year investing career. When I stepped down from the Co-CIO and Co-CEO role at Värde Partners at the end of 2015, I was dismayed at how little progress the industry had made in recruiting and retaining more diverse talent on their investing teams. I started by researching and working on ways that investment organizations can attract, retain and promote a more diverse employee base as well as thinking about ways to influence the industry to accelerate change. About three years ago, it became clear to me that one way I could use my experience, resources and influence to effect change was to invest in and back diverse talent. The idea for MPowered Capital has been several years in the making, and I couldn't be more excited about the opportunity set and amazing talent we are underwriting today.
When you started Värde Partners, did you have an angel investor or financial sponsor that took a special interest in backing you as a woman?
Page: No, just personal savings from the three founding partners. I still have a copy of my first Värde paycheck – which took nearly three years to achieve!
Were there any gender-specific hurdles you faced in starting and growing Värde?
Page: Not in a material or overt way, perhaps aided by the fact that Värde's two other founding partners were men and that I was in a position to commit capital directly.
You talk about the fact that diverse managers have been "underrepresented and under-capitalized." Can you expand on that?
Page: Diverse talent accounts for just 10% of total investment management firms and managers a mere 1.4% of institutional assets under management in the U.S. asset management industry. According to a 2018 study by WillisTowersWatson, the number of female fund managers around the world has remained stagnant for two decades at around 14%. A combination of structural forces and unconscious bias have created a circular conundrum. Capital has accumulated amongst established firms. LPs tend to reinvest capital with existing managers and, as limited partnerships have grown in size, LPs are committing larger amounts to maintain their allocations. There is a desire to invest with "people like ourselves" – it's human nature. The lack of portfolio "fit" – meaning considerations like first time funds, constraints in size (too small) or length of track record (too short) inhibit investments in diverse managers. As a result of many factors, research has shown that women must outperform to achieve the same assets under management as men.
Why do women and other diverse talent need the kind of support MPowered Capital offers?
Page: The combination of alpha generation and lack of capital flows to diverse investing talent creates what we believe is one of the most inefficient markets for capital formation in existence today. Importantly, to be successful in the market, investors need a unique set of skills to address the specific issues that give rise to this opportunity set. First, investors have to approach opportunities with flexible capital solutions. MPowered has several investing strategies in its portfolio, each of which are designed to address specific capital pain points in this emergent manager landscape. Equally important, in our opinion, is MPowered's ability to provide strategic advice to accelerate firm building and fund formation. We believe the MPowered team, coupled with its affiliations and network of service providers, can help propel managers through the critical start-up and early fund formations phases of their organizations.
Baird Financial Corporation is a limited partner investor in MPowered Capital’s MPowered Access Fund I; Baird Capital is not affiliated with MPowered in any way.