A study examines how racial bias influences financial investors. Globally, people of color manage less than 2% of assets for hedge funds, mutual funds, private equity, and real estate, which amount to more than 69.1 trillion USD. To examine the basis of the racial homogeneity, Sarah Lyons-Padilla, Jennifer L. Eberhardt, and colleagues designed an experiment in which 180 primarily white asset allocators from North America were asked to evaluate 1-page descriptions of fund manager teams. The 1-pagers, which included headshots, summaries of the teams' track records, and investment strategies, were systematically varied so that the managing partner was a white or black male and so that the team's credentials were strong or weak. Asset allocators rated strong white-male-led teams more favorably than strong black-male-led teams. Asset allocators rated weak black-male-led teams more favorably than weak white-male-led teams. However, asset allocators were not likely to invest in weak teams, regardless of race. Asset allocators took team competence into account when predicting future performance for white-male-led teams more so than for black-male-led teams. The findings suggest that the more qualified black-led teams are, the more bias they are likely to face. Such bias may contribute to the lack of diversity in the investment industry, according to the authors.
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Article #18-22052: "Race influences professional investors' financial judgments," by Sarah Lyons-Padilla et al.
MEDIA CONTACT: Jennifer L. Eberhardt, Stanford University, CA; tel: 650-703-2224; email: jleberhardt@stanford.edu; Sarah Lyons-Padilla, Stanford University, CA; tel: 540-847-1060; email: sarahlp@stanford.edu; Norris A. "Daryn" Dodson IV, Illumen Capital; email: daryn@illumencapital.com
Journal
Proceedings of the National Academy of Sciences