Greeting from the CEO Solange F. Brooks |
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Hola NAA familia,
We started the 2022 National Tour with a bang!
We had stimulating, thought-provoking discussions with the CIOs and their teams. Of particular note, Elizabeth (“Liza”) Crisafi, CIO at San Diego City Employees’ Retirement System (SDCERS) will be retiring this July.
Liza took over as the SDCERS CIO in January 2009, near the height of the financial crisis. Some say that at the time, she faced a portfolio in need of major revamping. The portfolio was at $3.7 billion after a serious drop the year before from $5 billion. She rolled up her sleeves and went to work. She succeeded. Currently, the portfolio is a well-managed $11 billion. She candidly shared with NAA her views on the market and in the running of an $11 billion fund. We are saddened that this amazing woman will leave the space but we wish her the best in all her future endeavors.
Gregg Rademacher, SDCERS CEO, commented that he will be working with an executive research firm to find the right person for the post. Greg sees it as an opportunity to bring diversity to his team at SDCERS. We would love someone from the NAA family to take this opportunity so if you know a candidate who would make a great CIO and is interested in living in beautiful San Diego California, please forward the information. (See Job Postings below.)
The first Dealmakers Forum of 2022, “Investment Consultants: Diversity Trends,” delved into interesting areas where our own Dr. Avinash Amin moderated. If you missed the event, please feel free to watch the replay below. Thank you to all the panelists who provided a spirited discussion.
Congratulations to Avante Capital Partners' Founder & Chairwoman, Jeri Harman, and Managing Partner, Ivelisse Simon, who were recognized this month in the L.A.Times Banking & Finance Visionaries list. They were included for their initiatives to increase diversity in private equity, among other 26 women recognized this year.
In April, we are celebrating Earth Month --hence our beautiful banner of endangered species from the deep seas. Most species are endangered because of increased water temperatures, ocean acidification, and increased frequency and intensity of coastal storms, according to The National Marine Fisheries Service (NMFS). We encourage you to remember and support all efforts to participate in the “E” in your Environmental, Social and Corporate Governance (ESG) efforts.
In this very special issue, NAA Voices includes a needed discussion on the GP Commit, a favorite topic of LPs and GPs alike. Our General Counselor, Jessie Gabriel, offers practical ideas to lower barriers for diverse and minority asset managers, especially women and single mothers. Jessie Gabriel is the founder of All Places, a business and legal strategy firm that supports women asset managers and entrepreneurs.
We have also included an article about transparency strategies by Oracio Gonzalez, our Legislative Consultant. Oracio touches on the agility needed to find the best strategies to achieve results. Sometimes just thinking out of the box and showing how transparency is important in our governmental agencies as it builds trust, and promotes education, and awareness. Oracio is the founder of Ollin Strategies, a full-service public affairs firm with deep relationships in California’s state capitol.
Lastly, our Marketing and Communications Adviser, Susana G Baumann, shares the defeating impact that funding “genderization” has among women entrepreneurs, especially women of color. In 2021, overall funding allocation reached a record high, but for women, a record low. A situation that should concern us all, not only in terms of equity but also because closing the revenue gap for minority women-owned businesses could have a huge impact on the US economic growth. Susana is the President of Excel Branding LLC, and the founder of the nonprofit organization Latinas in Business, Inc.
We proudly introduce one of our new members, Miguel (Mike) Nieves, CFA, CAIA, Director of Public Funds & Taft-Hartley Plans at Northern Trust Asset Management. In his role, Mike serves as a business development representative and trusted relationship manager delivering investment solutions to institutions located in the Midwest. Welcome to the NAA family, Mike!
Please continue to peruse our April B&B for other important information about CIO Asset Class Connections, upcoming events, and job opportunities. Once again, we want to give thanks to all who contribute to this effort and encourage you to send your news so we can brag about you!
Un abrazo,
Solange F. Brooks
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NAA Voices
Jessie Gabriel - NAA General Counsel & All Places CEO
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Commitment Issues: Why Supporting Diverse Managers May Require Us to Rethink the GP Commit |
Many of us continue to be disappointed by the low percentage of assets going to diverse fund managers. According to the most recent Knight Foundation study, of the $82 trillion dollars of assets being managed in this industry, a quite pathetic 1.4% of those funds are controlled by asset managers owned by women or people of color (versus the 65% of the U.S. population made up by those same women and people of color). And we all know this disparity is not tied to success rates, interest levels, or inherent ability (we do all know that by now, right?).
At the same time, there are an increasing number of allocators out there expressing a desire to invest with diverse managers. What accounts for this mismatch between expressed desire and actual invested dollars? One of the reasons allocators give is that there aren’t enough diverse-owned funds that meet their diligence requirements. Okay. So maybe it’s time to revisit those requirements. Let’s start with the GP commit.
The GP commit is a regular guest on allocator diligence checklists. For new fund managers, the principals are expected to commit between 1-2% of the fund’s total AUM. Let’s use a modest fund of $100 million with two GPs to illustrate. This means that, in order to check this box, each of those individuals needs to be sitting on personal wealth of between $500,000 and $1,000,000. This is on top of the living expenses these individuals will be incurring during the year-long (let’s be conservative) fundraising process when they will be working full-time with no income. Obviously, this burden is even greater for single GPs.
As a result, the GP commit requirement effectively excludes anyone who is not already wealthy. Given how wealth concentration works in this country . . . you can see where I’m going with this. The GP commit is a factor that, while neutral on its face, effectively reinforces the inequity in this industry. I’m also going to give a shout-out here to all the single mothers raising and running funds. We need you here! And the GP commit is brutal if you are the sole breadwinner trying to raise a family with no current income.
So why does the GP commit requirement exist? There are good reasons. If you are investing your money with a manager you want to know that manager believes in herself at least as much as you do. If she’s confident her strategy will be profitable, she would want to invest her own money in it, right? That investment will also motivate her to perform (the so-called “skin in the game” rationale). These are both fair. However, are there other ways to demonstrate a manager believes in her strategy and is committed to its success? Certainly.
For one thing, if a manager has chosen to devote all of his time to raising and then running an investment fund, where he is paid nothing for at least a year, then paid a conservative salary (that is a fraction of what he could be making at someone else’s fund), and the majority of his compensation comes in the form of a percentage of profits, you could argue this is pretty strong evidence he believes in the strategy and is motivated for it to succeed. Now, this may not be the case at a very large fund where the manager is receiving hefty management fees regardless of performance and may have factored in a significant salary for himself. But that is not the case with emerging funds, where management fees and salaries are low. In other words, this feels like a big fund requirement that is applied to (and effectively excludes) smaller funds that are not run by people who are already rich.
Still not ready to ditch the GP commit requirement altogether? Then how about providing more context and flexibility? With context, you can’t tell me that a $2,000,000 commitment from two GPs with trust funds is necessarily greater proof of commitment to the fund’s success than a $200,000 commitment from a self-made single mother. With flexibility, allocators can consider reducing the GP commit or allowing managers to make their commitment by the end of the investment period (rather than pro rata with the other LPs).
If you really want to change the status quo, you need to reevaluate the structure that has supported it. Look at your diligence checklist and, for every box that may exclude diverse managers, ask: is this necessary, or is there another way we can achieve the same result? Start with the GP commit.
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Oracio Gonzalez - NAA Legislative Consultant & Principal at
Ollin Strategies
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The Third Time is the Charm
Transparency is an important effort. Previously, the NAA tried twice before to secure legislation to reimpose and expand the requirement that the California Public Employees Retirement System and the California State Teachers Retirement System collect and annually report to the legislature each funds’ utilization of emerging and diverse managers across all asset classes. Each time, the legislation failed to advance.
In 2021, we took a different approach. We framed the need for the legislation as a direct response to the underinvestment of capital in minority communities that the COVID-19 pandemic so effectively amplified. In communities of color, the historic lack of economic opportunities and investment defaulted entire populations into “essential” work, vastly increasing the incidence of infection, severity, and lethality of the virus.
To reinforce this framework, we built a wide coalition of supporters to submit support letters and testify during committee hearings urging legislators to support the bill. The coalition included our co-sponsor, the Association of Asian American Investment Managers (AAAIM), as well as the National Association of Investment Companies (NAIC), the Greenlining Institute, the National Association of Securities Professionals (NASP), and The Investment Diversity Exchange (TIDE).
On October 4, 2021, the third time proved the charm when Governor Newsom signed AB 890 into law. Our success in California was just the beginning of our effort to create transparency in how pension systems across the county allocate their resources. Ultimately, legislators must have access to the data they need to assess if their pension systems are failing to diversify their manager pool and leaving alpha-generating opportunities to invest with women and diverse managers on the table.
To enhance access to capital for our members, requiring transparency in how pension systems deploy their assets will prove a crucial first step. Using our approach with AB 890 as a model, the Advocacy Committee is now pursuing similar initiatives in other states to secure legislation to require pension systems to collect and report to their respective state legislatures on the extent the funds utilize emerging and diverse managers to invest their assets.
While every state would benefit from transparency legislation, it is unrealistic to pursue a fifty-state strategy given the considerable time and commitment it takes to initiate legislation. Instead, we will target states with similar population profiles to California. Specifically, we are focusing on those states with minority populations of 40% and above.
Based on the results of the most recent bicentennial census, there are sixteen states with minority populations of at least 40%. While it is our goal to secure legislation in all sixteen states, we will first focus our efforts on the states with the highest Hispanic populations. This approach will allow us to leverage the strength and brand of the New America Alliance as the leading Hispanic advocacy entity in the access to capital space. It will also allow us to deploy the same outreach strategy we used to successfully get AB 890 signed into law.
The ultimate goal of securing the support of legislators to sponsor transparency legislation in their state will follow a period of education as a natural byproduct. We will frame the legislation following the California model, positioning each bill as a tool to ensure minority communities have access to the investment capital they need to flourish. As we secure authors, we will invite the partner organizations we worked with in California to advocate in support of the legislation.
We will reach out to states irrespective of their status: if they have already started their legislative session, are almost done, or are not having a session at all. Because it will take time to educate legislators on the importance of access to capital, our focus will be on doing just that, to educate. If we can secure sponsorship of legislation this year, that’s great, but it won’t be the driving factor behind our engagement because educating legislators will take time.
Just as transparency is important in the corporate culture of our businesses, transparency is important in our governmental agencies as it builds trust, and promotes education, and awareness. Transparency also strengthens productivity and innovation and ultimately expands relationships. Transparency benefits all of us. Please let us know if you have any questions regarding our efforts, and how you can help.
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Susana G Baumann - NAA Marketing and External Communications Adviser, Pres & CEO, Latinas in Business Inc.
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Funding “genderization” makes Latinas, minority women-owned businesses, big losers in 2021 revenue and funding
The message is loud and clear for Latinas and other minority women-owned businesses. You are not getting it!
Despite big announcements from traditional funders and allocators of capital that inclusion strategies for minority female founders’ access to capital are on the way, we have not moved an inch, not a centimeter!
We are not getting it, and I’m tired of funding “genderization.”
Many can blame the pandemic because women had to become caregivers of their parents and/or children, and still try to save their businesses. They can argue that women had to leave or close their businesses because of the lockdown and criticize government pandemic measures. They can also find excuses for operating raising costs or supply chain disruptions, but haven’t these been the same conditions for all small businesses operating during a challenging year?
According to a Biz2Credit study that reviewed 100,000 credit inquiries, “women-owned business profits averaged $88,995, much less than 2020’s figure of $119,654, and $47,152 less than the average for male-owned firms ($136,147) in 2021. In 2021, the effects of the pandemic were especially notable for women-owned companies, many of whom have been historically less well-financed compared to men-owned firms.”
The study also found that “profits for female business-owners dropped 26% in 2021 from 2020, while average annual revenues dipped 4%.”
- Average Annual Revenue dropped from $493,401 in 2020 to $475,707 in 2021.
- Average Profits (annual revenue – operating expenses) of women-owned businesses fell to $88,995 in 2021 from $119,654 in 2020
- Average Expenses increased from $373,748 in 2020 to $386,712 in 2021.
- Average Credit Score for female business owners dropped from 588 in 2020 to 580 in 2021.
- Top Industry: Services (except public administration) represented 31.9% of the women-owned companies in 2021.
Latinas and other minority women-owned businesses stall big time
Since the frenzy reported by American Express, The 2019 State of Women-Owned Business Report, between 2014 and 2019, the number of women-owned businesses climbed 21% to nearly 13 million (12,943,400). Employment grew by 8% to 9.4 million. Revenue rose 21% to $1.9 trillion. As of 2019, women of color accounted for 50% of all women-owned businesses.
While the number of women-owned businesses grew 21% from 2014 to 2019:
· Firms owned by women of color doubled that rate (43%).
· Numbers for African American/Black women grew even faster at 50%.
· Native-Hawaiian/Pacific Islander (41%),
· Latina / Hispanic (40%),
· Asian-American (37%) and
· Native American/Alaska Native (26%) businesses grew more slowly than for women of color in
general but faster than overall women-owned businesses and all businesses.
However, the disparity between minority and non-minority women is increasing.
· In 2014, minority-owned businesses averaged $67,800 in revenue;
· By 2019, the average had dropped to $65,800.
· In 2014, non-minority women-owned businesses averaged $198,500 in revenue;
· By 2019, the average had jumped to $218,800.
From 2014 to 2019, the average revenue for women-of-color-owned businesses shrank, except for Asian women-owned businesses. In 2022, there are 12.3 million women-owned businesses in the U.S.. (Fundera). The revenue generation decreased to $1.8 trillion annually. (LegalZoom)
It’s funding “genderization,” and this information proves it
The culprit of these gaps is the missed opportunity for female founders -especially Latinas and other minority women entrepreneurs- to secure funding for their businesses. Their access to venture capital continues to decrease percentage-wise.
According to a report by research firm PitchBook, “female founders secured only 2% of venture capital in the U.S. in 2021, the smallest share since 2016 and a sign that efforts to diversify the famously male-dominated industry are struggling.” Although it was the second year in a row that women’s percentage of V.C. funding decreased, the overall dollar value of female funding rose because total funding levels in 2021 hit all-time highs, according to the report.
The report stated that “U.S. startups founded solely by women raised nearly $6.4 billion of venture funding in 2021, 83% higher than the total raised in 2020. The accelerated pace of funding is part of an exceptionally strong year for V.C. investment across the U.S., which eclipsed its previous record and topped nearly $330 billion in 2021.”
The truth is, these numbers have been almost steady for female founders, especially Latina entrepreneurs and other minority women-owned businesses, for quite some time. “Black female startup founders have received just 0.34 percent of the total venture capital spent in the U.S. in 2021; however, the dollars invested in their companies are on the rise,” an analysis of Crunchbase data shows.
“The dollar amount received in angel, pre-seed, and seed rounds for venture-backed Latinx-owned startups in the U.S. had barely budged since 2018 when $185 million went to Latinx-owned companies raising those earliest rounds,” Crunchbase data shows.
In 2021, Latinx startups raising angel, pre-seed, and seed rounds only received $205 million, a mere $20 million increase from three years earlier. Almost all of the growth in funding that Latinx founders have seen in recent years went primarily to later-stage startups.
“When women teamed up with a male co-founder, they tended to raise more,” says the report. The mixed-gender female-male founder teams secured 15.6% of total venture cash in 2021, the highest amount since 2017!
One last detail: According to a DocSend data report, potential investors spent 50 percent more time scrutinizing the slide that details milestones and growth metrics of the company of all-female teams’ pitch decks than they do of all-male teams’ pitch decks.
Women need funding, and they need it NOW
Female founders secured only 2% of venture capital in the U.S. in 2021, the smallest share since 2016, a sign that efforts to fund them in this male-dominated industry not producing results. The statistic may sound familiar; it’s the exact same portion of capital startups founded by a solo female founder or an all-female team secured last year, too, according to PitchBook.
In a male-dominated industry, V.C. firms with female decision-makers represent less than 10% of all firms, and 74% of U.S. V.C. firms have zero female investors. But do we need women sitting on those decision-making seats to invest in other women?
Why it is not enough for women to be talented and have a solid business proposition to receive the funding they need? in the views of funders, what does a male founder guarantee in a business deal that a female founder does not?
At the end of the day, venture capital is still a relationship-driven industry. What are networks of “people-with-money” not offering to women that they are contributing to men? Why are they not opening doors for them?
Funding “genderization” prevents women, especially Latinas and other minority women entrepreneurs, from expanding their businesses. But it is also hurting an economy that could grow exponentially, and it has been proven ten times over.
Women need to understand that funding “genderization” in business is a serious discrimination and civil rights issue – a matter of “Sex and Gender Discrimination Law” as much as it is in the workplace. Until we do, we will continue to be serving coffee and updating calendar schedules.
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NAA Members Recognitions
Avante Capital Partners
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Avante Capital Partners' Founder & Chairwoman, Jeri Harman (R), and Managing Partner, Ivelisse Simon (L), were recognized this month in the L.A. Times Banking & Finance Visionaries list. They are among the 26 women recognized this year.
“It is an honor to be recognized alongside our Founder and Chairwoman, Jeri Harman, for not only our firm’s resilient performance in the last few years but also for our initiatives to increase #diversity in #privateequity," said Ivelisse Simon. "We are committed to being supportive partners for our clients and advocates for women in finance, so our organization and the larger community can continue to flourish."
The L.A. Times Banking & Finance Visionaries list recognizes executives for their successes and accomplishments during the last 24 months as well as #leadership in their organizations, while impacting change within their communities.
“Congratulations to all the visionaries on the list including our Managing Partner, Ivelisse Simon. We are honored to be recognized among them and applaud their tireless efforts to advance both their firms and their communities during the pandemic. I am proud of the team at Avante and their hard work to create opportunities for diverse individuals in finance,” said Jeri Harman.
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New Member Spotlight
Miguel ‘Mike’ Nieves, CFA, CAIA
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Northern Trust Asset Management (NTAM) is a global investment manager that helps investors navigate changing market environments, so they can confidently realize their long-term objectives. Entrusted with US$1.3 trillion of investor assets as of December 31, 2021, we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy.
That’s why we combine robust capital markets research, expert portfolio construction, and comprehensive risk management to craft innovative and efficient solutions that deliver targeted investment outcomes. As engaged contributors to our communities, we consider it a great privilege to serve our investors and our communities with integrity, respect, and transparency.
Miguel (Mike) Nieves, CFA, CAIA is Director of Public Funds & Taft-Hartley Plans at Northern Trust Asset Management. In his role, Mike serves as a business development representative and trusted relationship manager delivering investment solutions to institutions located in the Midwest region of the United States. Mike has more than 15 years of financial industry experience focused on institutional investment clients.
Prior to joining NTAM, Mike was a Relationship Manager for Northern Trust's Alternative Asset Services group. Previous to Northern Trust, Mike was a Senior Investment Analyst at US Bank for their Global Corporate Trust group. Mike earned his B.A. from DePaul University in Chicago, IL. He is a CFA charter holder and a CAIA charter holder, an active member of both the CFA Society Chicago and CAIA Chicago, and a FINRA Series 7 and 63 licensed representative.
The primary motivation for joining NAA was to engage and connect with its excellent network of diverse managers. At NTAM, we are committed to fostering a diverse and inclusive culture. That means we lead and live by example, creating greater value for our partners, investors, shareholders, and communities. We are driving change by developing innovative investment programs that partner with diverse managers, such as our Multi-Manager Program (est. 1979) and our Minority Brokerage Program (est. 2007).
In connection with the 2017 launch of our Northern Engage 360™ Fund, we developed a holistic, 360° framework to assess diversity within public and private investments. In the alternative investments space, our 50 South Capital team has integrated diversity into its culture through philanthropy and investment strategy since 2005, and we are raising Forward Fund I to invest with private equity managers who have demonstrated a commitment to advancing and promoting diversity.
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Upcoming CIO & Asset Class Connections
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Meketa Investment Group
April 26, 2022 – 12 pm - 1 pm ET
Service Employees International Union (SEIU)
April 28, 2022 – 12 pm - 1 pm ET
New Jersey Division of Investment
May 3, 2022 – 1 pm - 2 pm ET
StepStone Group
May 10, 2022 – 2 pm - 3:30 pm ET
Invesco Private Capital
May 12, 2022 – 12 pm - 1:30 pm ET
Callan LLC
May 17, 2022 – 12 pm - 1:30 pm ET
Teacher Retirement System of Texas (TRS)
May 19, 2022 – 2 pm - 3 pm ET
Fairview Capital Partners, Inc.
May 24, 2022 – 12 pm -1 pm ET
HarbourVest Partners, LLC
June 21, 2022 – 12 pm - 1 pm ET
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NAA supports matching high-quality professional talent with institutions across the United States. SEE CAREER OPPORTUNITIES HERE. Interested candidates, please reference New America Alliance in your application and notify Jodi Towner at jtowner@naaonline.org once submitted so we may be aware of your candidacy.
Employers, you may submit information on current high-level and high-impact job vacancies to Jodi Towner at jtowner@naaonline.org.
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